JOHANNESBURG
The South African Reserve Bank (SARB) hiked its repo rate (repurchase agreement rate) Thursday by 75 basis points to 6.25% from 5.5%.
Reserve Bank Governor Lesetja Kganyago said the effects of the coronavirus and heightened geo-political tensions slid the global economy into a period of persistently high inflation and weaker economic growth.
“Russia’s war in Ukraine continues to impair production and trade of a wide range of energy, food and other commodities. The supply of energy to the Euro Area is limited as winter approaches, placing immense strain on households, businesses and governments,” said Kganyago.
The new rate means the prime lending rate will increase to 9.75% from 9%.
SARB also revised forecasts for the economy to grow 1.9% in 2022 from a previous estimate of 2%.
“Growth in the first quarter of this year surprised to the upside, at 1.7%. In the second quarter, flooding in Kwa-Zulu Natal and more extensive load-shedding (ongoing power cuts) contributed to a contraction of 0.7%,” said Kganyago.
He said growth in the third and fourth quarters are forecast at 0.4% and 0.3%, respectively.
Kganyago also announced that the economy is forecast to expand 1.4% in 2023 and 1.7% in 2024, above previous projections.
He said private investment has strengthened on the back of the recovery but public sector investment remains weak.
Household spending remains supportive of growth but is likely to soften in 2023. Tourism, hospitality and construction should see stronger recoveries as the year progresses, he said.
