SARB slashes country’s growth forecast again as pandemic weighs on economy

THE SA Reserve Bank (SARB) yesterday slashed the country’s growth forecast further to -7 percent this year from the -6.1 percent forecast last month.

Reserve Bank governor Lesetja Kganyago said the Covid-19 pandemic would weigh on the country’s economic prospects for a while, with the gross domestic product (GDP) contracting deeper than expected.

Kganyago said even the easing of the lockdown regulations imposed in March would not be sustainable in supporting growth in the foreseeable future.

“Even as the lockdown is relaxed in coming months, for the year as a whole, investment, exports and imports are expected to decline sharply,” Kganyago said. “Job losses are also expected to be widespread.”

Kganyago said getting back to pre-pandemic activity levels would take time, with the GDP expected to grow by 3.8 percent next year and 2.9 percent in 2022.

North West University Business School’s Professor Raymond Parsons said the economy might contract even further than the SARB forecast as businesses were facing collapse.

“This forecast may still be too optimistic, and GDP growth may be as low as -10 to -12 percent, with widespread business failures and rapidly rising unemployment,” Parsons said.

Yesterday, SARB’s Monetary Policy Committee lowered the lending rate by 50 basis points to 3.75 percent in a bid to free up more capital for households impacted by the pandemic.

This is the fourth interest rate cut this year as the SARB tries to relax monetary policy by providing financial relief due to the economic downturn.