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South Africa: Gradual economic growth expected in 2014

South Africa’s economy is expected to grow gradually next year, following an uneasy 2013.

The country’s economic growth slowed to 0.7 percent in the third quarter of 2013, after expanding by a revised 3.2 percent in the previous three months.

On a year-on-year basis, it grew 1.8 percent in the July-September quarter from a revised 2.3 percent in April-June.

International ratings agency Fitch this month affirmed the country’s long-term foreign and local currency issuer default ratings at BBB and BBB, respectively, though concern remains about the slow pace of growth.

The country ceiling has been affirmed at A- and the short-term foreign currency issuer default rating at F3.

Fitch said in a statement that the key rating drivers were the floating exchange rate and South Africa’s inflation-targeting framework, which acted as effective shock absorbers for the economy.

Fitch said the country’s deep local capital markets supported financing flexibility, while government debt was largely local currency-denominated (92%) with a high average maturity of 9.8 years (including T-bills), limiting exchange-rate and financing risk.

Meanwhile, a poll of 17 economists, also released in December, showed that the growth will accelerate to 2.8 percent next year.

The outlook for 2015 was upgraded, with growth expected to average 3.4 percent from 3.2 percent in the previous poll.

In November, economists toned down their long-term growth forecasts due to high unemployment and slow progress in attracting investment into South Africa.

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