The South African Reserve Bank (SARB) on Tuesday reduced the growth rate forecast for 2017 from 1.2 percent to 1.1 percent while maintaining 1.6 percent for 2018.
The SARB governor Lesetja Kganyago said the prospect for growth and risks are balanced this year. The country’s growth rate will depend on improving global conditions and how they impact on the commodity prices.
He said the domestic growth outlook remained largely unchanged despite a possible weaker outcome in the fourth quarter of 2016.
“While some improvement is anticipated over the forecast period, growth is expected to remain below potential,” said Kganyago.
The governor said the bank expected the annual growth rate in 2016 to remain at 0.4 percent despite negative signals in the third quarter.
According to Kganyago, the rand has shown some resilience trading between R14.22 and R13.46 against the U.S. dollar due to the rating agencies’ decision not to downgrade the foreign credit rating to sub-investment grade.
“The rand has been positively affected by the improvement in the terms of trade, following the recent modest increase in commodity prices. Although the overall current account deficit is expected to narrow over the forecast period, it remains relatively wide, ” he added.
He warned that the risks might emerge in the coming months.
Kganyago said while slow growth rate is expected to continue in the EU, there is also risk since many countries will be having elections this year.
“There is still a great deal of uncertainty regarding the policies of the new administration, particularly with respect to the size of the promised fiscal stimulus,” he said. Enditem