Pretoria, South Africa — 05 June 2013
The South African Reserve Bank says it may lower its economic growth forecast again as mining strikes threaten production, while inflation pressures continue to mount as the rand weakens.
“The risks to economic growth lie to the downside as a result of the potential for further job and output losses, particularly in the mining sector,” Bloomberg News quotes the central bank as saying in its Monetary Policy Review released here. “The risks to inflation remain persistently skewed to the upside.”
On May 23 the bank cut its forecast for economic growth this year to 2.4% from 2.7%, while keeping its key interest rate at 5%, the lowest in more than 30 years. The economy expanded an annualized 0.9% in the first quarter, the slowest pace since a 2009 recession, Statistics South Africa said last week.
Economic growth has come under pressure this year because of weak demand for exports from Europe, as well as the fact that union rivalry and wage demands raise the risk of strikes in the mining industry.
The central bank’s monetary policy has “continued to provide stability through a period of both global and domestic uncertainty,” it said. “The unchanged repo rate at 5%pa and the modest negative real repo rate are expected to foster price stability and support the economic recovery.”
Business confidence has slumped as labour unrest worsened. The RMB/BER index dropped four points to 48 in the second quarter, Rand Merchant Bank said in an e-mail, while the South Africa Chamber of Commerce and Industry said its index had fallen to 90.4 last month, matching the lowest level in almost 10 years reached in March.
“With the latest data releases the growth forecast may need to be revised down at the next meeting of the Monetary Policy Committee,” the bank said.
Source: Bloomberg News. For more information, click here.