An exchange traded fund for South Africa has fallen into red for 2011 and recently dropped below its 200-day moving average, a technical key level in technical analysis.
The ETF remains stuck in neutral as the economy fails to generate the necessary growth to diminish a double-digit unemployment rate.
South Africa increased its non-farm labor force by 47,000 in the first quarter, reports Mike Cohen for Bloomberg. The National Treasury calculates that the country will need a 7% annual growth rate over the next decade to meet the government’s goal of creating 5 million jobs and bring down unemployment to 15% by 2020.
“The South African labor market is beginning to gain momentum,” remarked Shireen Darmalingam, an economist at Standard Bank Group Ltd., according to the report. “This bodes well for economic growth in the coming quarters. We could start seeing the unemployment rate improve as the year unfolds.”
“The jobs goal is extremely ambitious and likely unrealistic,” said Moody’s Investors Service in a recent report. “Without faster and sustained growth, the general situation will deteriorate once again as employment will fail to keep pace with the growth in the labor force.”
The economy expanded 4.8% in the first quarter year-over-year. The unemployment rate remained at 25% in the first quarter.
Monde Mnyande, South Africa Central Bank’s chief economist, attributes “infrastructural and capacity constraints coupled with persistent high levels of unemployment” to the country’s low growth outlook, reports Franz Wild for Bloomberg. The Reserve Bank estimates that inflation will surge above its 3% to 6% target range in the first quarter next year. The African Rand has gained some 39% against the U.S. dollar as commodity prices surged.
iShares MSCI South Africa (NYSEArca: EZA) - (click charts to expand)
WisdomTree Dreyfus South African Rand (NYSEArca: SZR)
Max Chen contributed to this article.