South Africa doesn't want to miss the global economic pick up

All major industries have seen a pick up, helped by low interest rates, high commodity prices and government policy, the South African Reserve Bank said.

The economy grew by an annualised rate of 3% in the six months through June, up from 1% a year earlier.

The central bank said that conditions are now favourable for faster and more sustainable job and economic growth.

"At or around current levels, nominal interest rates should contribute to easier cash flows for borrowers and a greater willingness to undertake investment projects," the Reserve Bank said in its 2004 annual report.

"Under these circumstances South Africa could achieve stronger trend growth and more job creation on a sustainable basis."

Worldwide

South Africa has been helped on its way by the general pick up in global growth that became evident in the second half of 2003, the bank said.

Africa as a whole has benefited, with its rate of expansion touching 4% in 2003, the highest for four years.

Underpinning that has been the rise in commodity prices, driven in part by booming growth in developing nations such as China and India.

Rising commodity prices have helped the economy

Platinum production was singled out by the central bank as a major contributor to South Africa's improving economy.

It also said that the main driver for manufacturing was domestic demand, though the outlook for exports is getting a little brighter.

"Early indications are that prospects for the euro area, South Africa's most important trading partner, have also improved in the first half of 2004," the Reserve Bank said in its report.

Weighed down

One significant drag on overseas sales was the strength of the South African rand.

The Reserve Bank calculates that the rand strengthened by 16% against a basket of currencies in 2003 and by a further 9% in the first seven months of this year.

With exports under pressure and domestic demand rising, the current account deficit widened significantly, to 2.7% of the gross domestic product (GDP) by the end of the first six months.

Despite its negative effect on exports and the current account, the stronger currency has helped to offset the inflationary pressure of record oil prices, allowing the central bank to keep borrowing costs relatively low.

Consumer spending has been boosted as a result, as has demand for bank loans and mortgages.

Agriculture, however, was hit by conditions outside of the Reserve Bank's control, suffering from poor weather conditions and a drop in prices.

Transport, storage and communication services were the industries that saw the quickest growth.