BLOEMFONTEIN: The euro zone crisis could hurt South Africa's economy and the country should maintain a supportive monetary policy to ensure growth in the medium term, the head of the International Monetary Fund said on Saturday.
Christine Lagarde, in South Africa as part of her first tour of the continent since taking the IMF post, said the African economic powerhouse would do well to also moderate wage growth.
Although well integrated into the global economy, South Africa mitigated the worst impact of 2008's recession through a sound macroeconomic regime, a strong financial sector and a flexible exchange rate, she said.
"The ongoing difficulties in the euro area, one of South Africa's main export markets, present significant downside risks to the economic outlook," Lagarde said in a statement after meetings with President Jacob Zuma and senior officials.
"In this context, we agreed that the challenge now is to ensure that monetary policy remains supportive and competitiveness improves."
The country has lost about a million jobs in the past two years, positions analysts say will be difficult to reopen because unions have priced labour out of the market.
The average factory worker in South Africa earns about six times as much as a factory worker in China and is less efficient.
South Africa, along other emerging markets, is bearing the brunt of global risk aversion triggered by the euro zone crisis. Its rand currency fell nearly 23 percent against the dollar in 2011.
Comments
Comments are closed for this article.