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CORRECTED: Moody’s says S.African economy rebounding

Ratings agency Moody’s said Thursday it expected South Africa’s economy to grow by 3.5-4.0 percent annually over the next two years, lower than official government forecasts.

“Moody’s Investor Services expects South Africa’s economy to grow by around 3.5 percent to 4.0 percent in the coming two years, after emerging from the contraction that began in 2008,” the agency said in a statement.

In February, Finance Minister Pravin Gordhan projected growth to reach 4.1 percent in 2012 and 4.4 percent in 2013.

Soummo Mukherjee, senior analyst at Moody’s Johannesburg, said the outlook for South African firms was “generally stable,” with the chance of a ratings hike for those “able to balance the prospects of possible increased merger and acquisitions activity against capital structure changes.”

In 2008, Africa’s largest economy slumped into a nine-month recession, the first since the end of apartheid in 1994.

The ratings agency said the country’s banks that weathered the crisis were now “finding it difficult to return to pre-crisis levels of profitability because of challenges such as compliance with Basel II liquidity rules, the endemic high consumer indebtedness and continued high loan-to-value ratios.”

In November, Moody’s upgraded the outlook for the country’s banking system from negative to stable, saying a rebound from recession and low inflation will give the sector a boost.

Jean Francois Mercier, an economist at Citi Group, said the projections were in line with estimates by local financial institutions, given the lower interest rates.

“After good growth seen at the end of last year, we expect the economy to gain momentum, boosted by recovery in private consumption,” said Mercier.