Ed Richardson
THE BUREAU for Economic Research (BER) predicts that the upswing in the South African economy will gain pace over the next two years despite current high oil prices and adverse exchange rate movements.
We believe that the upswing in the business cycle will increase in momentum during the first half of next year and result in real growth rates of 3,3% and 3,7% respectively for 2001 and 2002, says the BER's Ben Smit.
Smit says he expects oil prices to start declining next year to around $25 a barrel and the rand's exchange rate to track the euro, stabilising or even rising slightly against the US dollar in the short-term.
This means the South African Reserve Bank should be able to cut the 14,5% prime lending rate by one percentage point by the middle of next year, Smit says, adding that he expects the government to hit its inflation target of 3% to 6% in 2002.
But Smit warns that several factors could push his forecasts off course.
These are how the Middle East crisis is contained and resolved, the speed at which the United States economy slows, unexpected exchange rate movements and consumer confidence.
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