‘Recession will soon be over,’ says economist

“Pessimists are having a ball for no reason, because what they call an ‘economic recession’ will soon be over.”

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“Pessimists are having a ball for no reason, because what they call an ‘economic recession’ will soon be over,” said Dr Roelof Botha, joint MD of the Gopa Group SA, a joint multidisciplinary research company, at the Grain SA winter grain meeting in the Western Cape.
Dr Botha pointed out the US’s main problem was toxic assets. “These assets are losing their value, but they’re not becoming worthless.” He predicted that the situation would soon be salvaged with the economic injection the US government has pledged to spur growth, as well as the tax breaks envisaged for lower income groups in the country.
“These interventions could make the toxic assets worth more than debt within six to nine months,” he said.
He added the negative economic growth in Germany and Japan also doesn’t reflect a true recession. “Both these countries have had negative population growth over the past few years, so their income per capita remains high, even though their economic growth has dropped to 0,9%.”
Developing countries like India and China are continuing to grow, albeit not as much as in the past. The countries are helping to buffer the rest of the world from falling into a full-blown recession.
Dr Botha predicted that interest rates in South Africa would drop to 12% and lower by June/July this year, depending on production costs. He expected the first 1% reduction to be made this month with another 0,5% reduction in March, due to lower inflation levels.
“This should soon put an extra R2 000 a month in consumers’ pockets again. They might be cautious about spending this at first, but South Africans have never been great savers and will soon indulge in old spending habits again.”
Dr Botha is convinced South Africa will achieve more than 3% growth in the gross domestic product (GDP) this year. “It’s finance minister Trevor Manuel’s job to be overly cautious when setting economic goals, but this doesn’t mean all other economists should be overly cautious.”
He went on to say, “Indications are that we could maintain a 6% growth rate in 2010 in a business-as-usual scenario. However, growth could drop to 5% due to crime, government remaining ineffectual and previously disadvantaged individuals not being incorporated into the economy.”
Dr Botha added that real capital formation declined significantly prior to the 1994 election, but it’s been steadily increasing since then, even with the new election scheduled this year.
“There’s more business confidence and people have more confidence in South Africa, so they’re still investing here. This is despite the steady decline in government’s capital expenditure as a percentage of the GDP,” he pointed out. – Glenneis Erasmus