SOUTH Africa’s economy is likely to grow by 2.2% in 2013, on a combination of factors including slower private-sector spending and lower consumer spending, Rand Merchant Bank (RMB) economists said in a conference call on Friday.
RMB economists are so far the only analysts forecasting growth to slow this year. Most forecasts are for the economy to grow by about 2.8%. The Reserve Bank expects 2.9% growth.
Statistics South Africa is yet to release last year’s growth data but expectations are for it to come in at 2.5%.
RMB economist Carmen Nel said 2013 growth would be supported by export growth.
Both fiscal and monetary policy were not expected to aid growth much this year given that government finances were under pressure, while the Reserve Bank would be "constrained by external vulnerabilities", Ms Nel said.
Ms Nel said consumers would also be unlikely to contribute much to growth due to cost pressures and a moderation in employment growth. RMB forecast household consumption expenditure to slow to 2.8% this year.
"Consumers are relying on debt finance to prop up consumption ... another interest rate cut will not make a big difference," Ms Nel said.
The deficit on the trade account, which was the case for most of last year, is expected to narrow, which would ease pressure on the current account.
RMB expected inflation to accelerate to around 6.6% by July on factors such as higher food price inflation. Inflation is then seen falling back into the Reserve Bank’s 3%-6% target band by the end of the year.
The higher inflation, coupled with a weak growth environment, would likely cause interest rates to remain on hold for this year.
RMB forecast the current account deficit to narrow from 6.3% in 2012 to a deficit of 5.3% this year on a combination of expected export growth recovery and slower import growth as a result of a weaker rand.
The bank warned that the risk of further downgrades was "elevated" if a strong moderation in economic growth coupled with increased government expenditure were to occur.
Ms Nel said, however, that the "pressure is on" for government to "keep a tight lid on expenditure" and that it did not have "the scope" to increase spending.