South African Economy stagnating in 2011

The Reserve Bank has released its annual economic report for 2011 and it paints a relatively concerning picture of South Africa’s economic situation.
Although an economic recovery has occurred, it it unfortunately not enough. Most importantly, job growth has ground to a halt in the last quarter and Foreign Direct Investment (FDI) has slumped dramatically.
Stagnation would be the most likely economic outcome for 2011; as opposed to 2011 being the โ€œyear of the jobโ€ as announced by President Zuma in his State of the Nation Address at the beginning of the year.

Governemnt spend on huge projects will decrease over the short term.

For 2010 as a whole, economic growth stood at 2.8 %, whilst growth during the first quarter of 2011 stood at 4.8 %. Although the 4.8 % number during the first quarter of 2011 is an improvement on the low rate of 2.8% during 2010, it still does not come close to the levels needed to seriously address poverty and unemployment in our country.
Growth rates of 6 to 8 % are required in order for South Africa to make significant inroads in terms of poverty eradication.
The Democratic Party (DA) commended the Reserve Bank for its monetary approach during the time reviewed by this report.

The relatively accommodating monetary policy has helped debt ridden consumers and has driven higher household consumption and economic growth.
However, as inflation rises, the Reserve Bank will be forced to increase interest rates, and thereby put further pressure on the fragile recovery.

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