Reserve Bank optimistic about load-shedding – revises GDP upwards

The South African Reserve Bank (SARB) marginally revised its forecast for South Africa’s GDP upwards to 0.8% from 0.7% previously. 

At its meeting on Thursday, the Monetary Policy Committee (MPC) voted to pause the interest rate hiking cycle again.

This decision means the repo rate will remain at 8.25% while the prime lending rate is 11.75%.

Unlike previous meetings, the decision was unanimous, as all members of the MPC preferred to keep the rate on hold.

However, this is not necessarily the end of the hiking cycle, SARB Governor Lesetja Kganyago reiterated today.

Kganyago said risks to the inflation outlook are still assessed to the upside, as oil markets are tight and core inflation remains sticky.

On the other hand, South Africa’s economic outlook remains uncertain, with household spending and property prices under pressure. 

The Reserve Bank expects this to weigh on the country’s economic growth for a sustained period, as most of South Africa’s GDP comes from consumer spending. 

Economic growth is expected to be marginal at 0.8% despite the SARB increasing its outlook several times during the year. 

South Africa’s economic growth is unlikely to accelerate despite the improved performance of Eskom towards the end of 2023. 

“Energy and logistical constraints are still binding on economic activity and generally increase costs,” the MPC said. 

The SARB expects Eskom’s performance to improve further in 2024 and 2025, pushing it to raise its forecast for economic growth over the medium term to 1.2% in 2024 and 1.3% in 2025. 

While the South African economy has shown some resilience, economic growth has been volatile and highly sensitive to external shocks. 

“A sustained reduction in load-shedding, or greater energy supply from alternative sources, would significantly increase growth,” SARB Governor Lesetja Kganyago said at the meeting today.

“The operation of ports and rail, however, has become a serious constraint.” 

The SARB’s outlook for global economic growth in 2023 has also been increased to 2.7% from 2.6% and will moderate to 2.6% in 2024. 


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