While South Africa’s shorter-term economic challenges – most notably the current account deficit and debt levels – needed to be addressed in the upcoming 2013 budget, local economic fundamentals were sound and a steady acceleration of growth over the medium term was expected, Ernst & Young Africa Business Center director Michael Lalor said on Wednesday.

Speaking at a media briefing, he said the country had the potential to become a leading blue-chip emerging market destination, but was currently “punching below its weight” as a result of negative, yet inaccurate, market sentiment.

According to an average weighting by the World Bank, Transparency International and the World Economic Forum, besides others, South Africa was among the highest-ranked emerging markets – above Brazil, India, China and Russia – in a rational country risk analysis.

“The dominant narrative around the current economic situation in the country is glass-half-empty, but that it simply not the reality, as the facts show,” Lalor asserted.

Referring to the quarterly 'Rapid Growth Markets Forecast' report released by Ernst & Young on Wednesday, Lalor expected South Africa’s gross domestic product (GDP) growth to accelerate to around 4% a year by 2014, after picking up to around 3% this year.

This rate compared favourably with both developed and emerging markets, with Brazil on a par and the US, the UK, Poland and Russia expected to lag behind.

Lalor added that evaluations of the South African economy often lost sight of the international context in which the country operated and did not consider a strong record of sound economic management.

“The economy has been well managed over the long term and through the economic  crisis.

Underpinning this are favourable economic fundamentals, including a growing working age population, natural resources and a favourable geographic position as a platform for investment into the rest of the continent,” he commented.

The report added that the country was also less vulnerable to swings in global commodity prices, as it was less dependent on resources than other resource-rich economies.

In addition, government had committed to reducing the budget deficit from its current position of around 6% of GDP to a more sustainable level, which would continue to contract as global demand for exports recovered.

“South Africa has the potential to achieve rapid growth over the medium term, which would outstrip the rates seen in a number of developed and developing States, but there are are obviously inherent risks,” Lalor warned.

He added that the execution of the National Development Plan, an intent by the State to position the country as enabling investment into the continent, and investment and labour market reforms would be critical for the realisation of growth.

“There seems to be a perception that other African countries are moving up, while South Africa is stagnating. As wee see it, in a basket of emerging economies, we are comfortably positioned in the middle,” he said.