Finance Minister Pravin Gordhan says that South Africa’s economy will not slip into recession, however it needs to make tough decisions about how it runs its finances.
Gordhan’s comments contradict those of economists who have said that sharp falls in the rand pointed to a contraction in 2016.
“We are growing as an economy, we are not going into a recession. But we are not growing fast enough,” Gordhan told a media briefing after a cabinet meeting.
The rand, among the most volatile of major emerging market currencies, slumped to a record low of R17.9950 to the dollar during Asian trade on Monday on fears that China wanted to weaken its currency aggressively, though it has since recovered some ground.
The depreciation has, however, helped SA’s export prospects and, combined with a sharply lower global oil price, has helped to alleviate pressure on South Africa’s current account.
Gordhan, who returned as finance minister in December, said he would be meeting with the Reserve Bank to discuss how to deal with the challenges of growth.
In 2010, Gordhan wrote a letter to then-Reserve Bank governor Gill Marcus asking the Reserve Bank to be mindful of employment and growth alongside its price stability and inflation mandate.
“We will certainly be meeting regularly with the Reserve Bank and look at the current environment to see how we approach challenges,” Gordhan said.
The National Treasury has set a growth target of 1.5% for 2015, though quarterly data suggest this may be hard to achieve.
“We’ll have to make some tough decisions about how we run the finances of the country,” Gordhan told 702 Talk Radio. “I can assure you that we are working together on a budget that is credible and can inspire confidence in our country.”
In morning trade on Friday, the rand traded at R16.52 against the dollar.