January 11, 2018 / 11:00 AM / 10 months ago

South African economy may grow 2 percent in 2018, finance minister says

South Africa's Finance Minister Malusi Gigaba poses for a photograph after speaking at the Thomson Reuters economist of the year awards at the Johannesburg Stock Exchange (JSE) offices in Sandton, South Africa, July 13, 2017. REUTERS/Siphiwe Sibeko

EAST LONDON, South Africa (Reuters) - South Africa’s economy may grow 2 percent or more this year if the government takes the right policy decisions, Finance Minister Malusi Gigaba said on Thursday.

“The capacity of the South African economy’s growth levels far exceeds the targets that we have set ourselves,” Gigaba told a business gathering in East London. “We can even grow at more than 2 percent.”

The country’s economy slipped into recession in the first quarter of 2017, then recovered in the next two quarters, although it is expected to lag a global growth recovery, mainly because of policy and political uncertainty.

“... There are certain decisions we need to take, and if we take them, the economy can exceed our expectations this year,” Gigaba said.

S&P Global Ratings cut Pretoria’s local currency debt to “junk” status in December, citing a deterioration in the country’s economic outlook and public finances. Moody’s placed South Africa on review for a downgrade.

The downgrades followed Gigaba’s maiden budget speech in October, where he announced a gap much larger than expected in revenues and cut the 2018 growth forecast to 1.1 percent.

In the budget, Gigaba also said government was considering selling its stake in state companies to fund bailouts to ailing power utility Eskom and the South African Airways. Government bailouts to state firms total about 500 billion rand ($40 billion).

“We need to ensure that Moody’s does not downgrade us in February this year. We will outline a programme to stabilize the debt at the same time as we outline a programme to grow the economy and create jobs,” said the finance minister.

($1 = 12.4388 rand)

Reporting by Ed Stoddard, writing Mfuneko Toyana, editing by Joe Brock, Larry King

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