South African Economy Grows Unexpectedly.

The South African economic grew unexpectedly in the fourth quarter to an annualized yearly high of 5.3 percent.

Compared to a growth rate of just 2.7 percent between 1998 and 2002, the current rate is the fastest pace in over 25 years.

This boom has been attributed to the buoyant construction industry and the resurgence of manufacturing.

According to an average across 11 estimates surveyed by Bloomberg the rate was predicted to be around 4.4 percent, representing a 0.4 percent slowdown from the previous quarter.

Government spending on infrastructure, stadiums and the national grid as it steps up preparation for the 2010 FIFA World Cup has given the construction industry a huge boost.

This is set to continue as the government in planning on increasing spending on infrastructure by 18 percent to 568 billion rand before the tournament is held.

This has partly helped to allow the interest rates to remain stable. And according to Econometrix Treasury Management of Johannesburg, this “is evidence that investment spending is really a strong driver of growth.”

Growth forecasts show that this current trend may not continue and according to Adenaan Hardien, chief economist of African Harvest Fund Managers in Cape Town it is expected that “growth will be about 4 percent this year, which implies a sharp moderation in each of the quarters as we expect weaker growth in mining and manufacturing, mainly because of the electricity crisis, but also because of higher interest rates.”

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