Reuters SA Survey of Economists (April 2008)

The April edition of the Reuters South African Survey of Economists has just been published. (The Econometer is a measure of economic sentiment drawn from a monthly poll of forecasts by leading economists in South Africa and abroad and presented in the form of an index. The index reflects the forecasters’ sentiment for a quarter 12, 11 or 10 months forward.) The Index was weighted down by expectations of slowing growth, rapidly rising inflation and yet higher interest rates which are now expected to remain high for longer than was previously anticipated.

The April poll showed decreasing confidence in the ability of the SA economy to maintain recent growth rates and annual figures were revised lower for all three forecast years.

In the case of inflation, expectations were revised substantially higher for all three inflation measures for each of 2008, 2009 and 2010 as record prices on global commodity markets continue to threaten the inflation outlook in economies through the developed and emerging world.

Following the 50 bp increase to the Repo (to 11,5%) and Prime (to 15%) rates at the April MPC meeting, short term interest rate forecasts were likewise materially higher with near-term figures suggesting the likelihood of further increases before the end of H1 2008.

Despite a strong rally in the rand against its major cross exchange rates, the outlook remains dim for the rand which is seen weakening from current levels and turning to a protracted yet moderate weakening trend.

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