South African Recession Unlikely Says Old Mutual Economist

May 6 - There is good news on the horizon for South Africa's currently rickety economy, according to Old Mutual Chief Economist Rian le Roux. He feels that, despite the problems experienced in many sectors of the industry, it is still safe to say that the country's economy is not heading for a recession - good news for many who are keeping a sharp eye on their investments.

"A full blown recession looks unlikely given the likely trends in investment and consumption by the private sector, as well as welcome support to key sectors of the economy from the weaker rand," said le Roux. "Investment growth rates would have to almost halve from their level in the past four years (11.6%) and household spending would have to turn negative (from 7% growth over the past four years) to cause GDP growth to fall below zero."

Old Mutual's Roux warns, however, that - as with anything in life - unwelcome surprises are always waiting around the corner and that unexpectedly severe inflation or interest rate shocks could have a bad effect on the economy overall.

"Inflation and interest-rate-sensitive areas and other businesses that are unable to pass on rising costs to their customers are obvious victims of the current inflationary environment," says Roux.

Roux was generally optimistic about the current situation in the South African economy, however. He showed that many sectors of the market are faring very well, especially those that could benefit from the weaker rand, such as tourism, imports and the mining sector. "High global commodity prices will further benefit mines and agriculture," he said.