There is now a "significant" danger of another hike in interest rates in April, Nedbank chief economist Dennis Dykes said during a presentation on Tuesday.

Dykes says that if you had asked him the risk of this happening two weeks ago, he would have said 45 percent, but that current conditions had now worsened to such an extent that the expectation is 55 percent.

He says this is not necessarily "the right thing", but that he does believe interest rates are an effective tool in SA's difficult environment.

He says things like price controls, of which there are murmurs in the liquid petroleum gas and medical fields, don't work as they affect supply.

Dykes says the advantage of the inflation target is that it anchors perceptions in the medium term.

He expects interest rates to impact the economy negatively until the middle of 2009.

GDP growth below consensus

He foresees GDP growth in SA at 3.2 percent in 2008, which he sees as possibly a little stronger than sentiment, but below consensus.

However, he sees 2009 being a stronger year, although still below four percent growth (3.9 percent) due to the disadvantage of a flat base.

However, he does expect consumer spending to start "taking a front seat" again in the second half of 2009.

He sees growth accelerating into 2010 as it comes off a more favourable base.

"Fixed investment spending will remain powerful during this period," he adds.

The presentation was conducted in conjunction with the French South African Chamber of Commerce and Industry.

South Africa's central bank committee meets again on 10 April to decide on interest rates.

I-Net Bridge

Print this page
Send this article to a friend
RSS
de.li.cious
facebook