SARB revises growth forecast up to 1.2% from 0.9%

The South African Reserve Bank (SARB) has revised its growth forecast up to 1.2% from the previous 0.9%.

The central bank made its revision during its bi-monthly Monetary Policy Committee (MPC) meeting this week.

The MPC delivered the latest repo rate decision on Thursday, keeping the benchmark policy rate unchanged at 7%.

The prime lending rate remains at 10.5 %.

SARB governor Lesetja Kganyago said the upward revision is despite a weaker export outlook on the back of higher tariffs.

“Turning to South Africa, at our last meeting we noted positive indicators for second-quarter output. Last week’s GDP [gross domestic product] release still surprised on the upside, with the highest quarterly growth rate in two years. We have therefore marked up our growth forecast for the year, from 0.9% to 1.2%.”

Kganyago revealed that modest output gains are expected over the next few years, with the help of structural reforms.

“There are also some cyclical indicators, such as credit extension, which look positive. However, reaching a healthy growth rate will require much higher investment levels than we are achieving now.”

SARB GOVERNOR OUTLINES INFLATION TARGET

He said the central bank is still in talks with the National Treasury on the inflation target in what could reshape monetary policy and help lower long-term interest rates.

The move to lower the target in July caused what appeared to be a rift between the monetary and fiscal policy heads.

This followed the central bank’s decision to revise its inflation target down to 3% on the lower end of its inflation target band of 3.6% instead of the midpoint.

National Treasury accused the SARB of making a unilateral and pre-emptive decision.

Kganyago and Finance Minister Enoch Godongwana later agreed to find common ground.

Speaking during yesterday (Thursday)’s repo rate announcement Kganyago again addressed the matter.

“We are always talking and part of the reason why we referenced that joint statement was because it captured the conversations we have been having. That is where I will leave it.”

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