Growth should start show­ing up­wards tick

The Star Early Edition - - BUSINESS REPORT - Sandile Mchunu

SA RE­SERVE Bank gov­er­nor Le­setja Kganyago is con­fi­dent that South Africa’s eco­nomic growth is likely to re­sume in the sec­ond quar­ter of 2017.

The last quar­ter of 2016 and the first quar­ter of 2017 showed con­trac­tion in the econ­omy, which pushed the econ­omy into a re­ces­sion.

“We be­lieve that the worst is be­hind us and that growth in the sec­ond quar­ter of this year will be pos­i­tive,” Kganyago said at the bank’s an­nual gen­eral meet­ing.

The last two con­sec­u­tive quar­ters pushed the coun­try into a tech­ni­cal re­ces­sion – the first in eight years – which ex­erted pres­sure on a gov­ern­ment grap­pling with cor­rup­tion al­le­ga­tions and credit rat­ing cuts.

Kganyago said the past year had seen the worst do­mes­tic growth per­for­mance since the re­ces­sion dur­ing the global fi­nan­cial cri­sis. The econ­omy grew at a pal­try 0.3 per­cent last year and re­cently recorded two con­sec­u­tive quar­ters of neg­a­tive growth.

“The SA Re­serve Bank had ex­pected the fourth quar­ter of 2016 to be the low point in the cy­cle, but growth in the first quar­ter of this year sur­prised sig­nif­i­cantly on the down­side at -0.7 per­cent.

“This con­trac­tion was broad-based, with only the pri­mary sec­tor record­ing pos­i­tive growth,” Kganyago said. How­ever, the Re­serve Bank’s growth fore­cast was re­vised down sig­nif­i­cantly, as com­mu­ni­cated at the re­cent meet­ing of the mon­e­tary pol­icy com­mit­tee.

“Growth of just 0.5 per­cent is now fore­cast for this year, ris­ing to 1.3 per­cent and 1.5 per­cent re­spec­tively, in the next two years. This is clearly too low to make any mean­ing­ful in­roads on un­em­ploy­ment,” Kganyago pointed out.

The In­ter­na­tional Mon­e­tary Fund has also re­vised South Africa’s econ­omy fore­cast and pred­i­cated that it would grow by 1 per­cent in 2017.

The Re­serve Bank em­pha­sised that although the econ­omy had been in a re­ces­sion, it was ex­pected to re­cover in the lat­ter part of this year.

Kganyago also ad­dressed the is­sue raised about the man­date of the Re­serve Bank .

Pub­lic pro­tec­tor Bu­sisiwe Mkhwe­bane said in June that the Re­serve Bank ’s pri­mary role must no longer be about pro­tect­ing the value of the cur­rency but it should be about pro­mot­ing eco­nomic growth and pro­tect­ing the so­cio-eco­nomic well­be­ing of its cit­i­zens.

“Our con­sti­tu­tion is clear on this too: in car­ry­ing out its man­date, the Re­serve Bank must not bow to any pres­sure, be it po­lit­i­cal or from the pri­vate sec­tor.

“Price sta­bil­ity or the pro­tec­tion of the value of the cur­rency is a core func­tion of cen­tral banks. I know of no cen­tral bank that does not have this man­date,” he said.

De­spite the chal­leng­ing en­vi­ron­ment in which the Re­serve Bank op­er­ates as an in­sti­tu­tion “it re­mains strong”.

“It is staffed by peo­ple who are com­mit­ted to the pro­mo­tion of the eco­nomic well-be­ing of all South Africans,” he said.

PHOTO: SIMPHIWE MBOKAZI

Re­serve Bank Gov­er­nor Le­setja Kganyago is hope­ful that the econ­omy would start im­prov­ing later this year.

THE rand weak­ened on Fri­day, fal­ter­ing in the face of tech­ni­cal bar­ri­ers and po­lit­i­cal wor­ries af­ter an ex­ec­u­tive at the power util­ity, Eskom, was sus­pended pend­ing a probe into graft.

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