Mboweni clashes with Manuel
The titans fight over whether we will see another quarter of negative growth or not.
(Reuters) - South African Reserve Bank Governor Tito Mboweni said on Tuesday he "might not be surprised" to see another quarter of negative growth, which would send Africa's biggest economy into recession.
South Africa's economy shrank by 1.8 percent in the fourth quarter of 2008 and weak manufacturing and mining output have indicated it heading for its first recession in 17 years, although the Treasury is still optimistic this will be avoided.
"There might be a bit of a difference of opinion between me and the finance minister (Trevor Manuel)," Mboweni told members of the Johannesburg Country Club.
"He's confident we won't see another quarter of negative growth. We are of the view that we might not be surprised to see another quarter of negative growth ... technically that's a recession."
Mboweni said government's infrastructure spending plan, the Reserve Bank's inflation targeting policy and fiscal discipline had provided a buffer against the global economic crisis.
Inflation has been above the central bank's 3 to 6 percent target band since it breached it in April 2007. It peaked in August 2008 and stood at 8.6 percent year-on-year in February.
Mboweni said the inflation outlook had improved and headline CPI was likely to come back to the target band in the third quarter, then pierce it briefly before settling back in the band in 2010.
But he was concerned about electricity tariff increases, saying there was no doubt "there would be negative impact on inflation, it is something we need to watch very carefully".
Mboweni said there was little room to shift economic policy after elections on April 22.
"Whichever party takes over, they will have to confront this reality: there's little room for manoeuvre -- that agenda put out by G20, they'll have to follow that agenda, there's little option really."
"If anybody asked for my advice, I'll tell them to try and stay the course."
Investors have been nervous that economic policy in South Africa might change to accommodate the demands made by the ruling ANC's leftist allies for expansionary fiscal policy and a relaxation or abandonment of inflation targeting.
The influence of the trade union and communist allies has increased within the African National Congress -- which is seen holding on to power in the polls -- after they helped Jacob Zuma win the party's leadership battle with former President Thabo Mbeki.
Article by: Phumza Macanda - www.moneyweb.co.za