The South African Reserve Bank (SARB) yesterday took a cautious stance and maintained its 4.2 percent gross domestic product (GDP) outlook for 2021 as recent supply disruptions and protracted lockdown could result in downward risks to economic growth. Photo: Bongani Shilubane/African News Agency (ANA)
The South African Reserve Bank (SARB) yesterday took a cautious stance and maintained its 4.2 percent gross domestic product (GDP) outlook for 2021 as recent supply disruptions and protracted lockdown could result in downward risks to economic growth. Photo: Bongani Shilubane/African News Agency (ANA)

SA Reserve Bank adopts cautious stance and maintains its 4.2% growth forecast

By Siphelele Dludla Time of article published Jul 23, 2021

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THE South African Reserve Bank (SARB) yesterday took a cautious stance and maintained its 4.2 percent gross domestic product (GDP) outlook for 2021 as recent supply disruptions and protracted lockdown could result in downward risks to economic growth.

Governor Lesetja Kganyago said the central bank expected the impact of the recent protests on GDP in the third quarter to negate the better than expected 4.6 percent first-quarter GDP print. Kganyago said the recent unrest that caused an estimated R50 billion economic damage could have lasting effects on investor confidence and job creation.

“Although some sectors, notably mining and manufacturing have largely recovered to pre-pandemic levels, production remains muted in sectors harder hit by the pandemic and in regions now affected by the unrest,” he said.

Anchor Capital’s investment analyst, Casey Delport, concurred that the recent unrest in South Africa would hamper the generally supportive global conditions.

“Recent events in the country, their impact on the vaccination effort, a longer-than-expected lockdown, limited energy supply, and policy uncertainty pose downside risks to growth,” Delport said.

In a unanimous decision, the SARB voted to keep its benchmark repo rate unchanged at a record low of 3.5 percent.

The bank revised headline consumer price inflation (CPI) for 2021 slightly higher to 4.3 percent, up from 4.2 percent, and revised lower to 4.2 percent from 4.4 percent in 2022.

Kganyago said while growth was expected to return to pre-pandemic levels in 2023, it was too early to tell the impact of the violence.

The bank’s investment forecast was revised up for this year but remains constrained.

PPS Investments’ portfolio manager Luigi Marinus commended the

SARB for playing open cards about its economic forecast. “The transparency and consistency of the SARB’s decision making process is to be commended as it provides a firm base for investment decision-making in an uncertain economic environment,” Marinus said.

North West University Business School economist Professor Raymond Parsons said the bank’s decision to not revise its previous forecast suggested that it did not see recent developments as having a lasting impact on growth outlook this year.

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