South Africa’s central bank Governor Lesetja Kganyago says the country’s economic prospects do not look promising.
Kganyago, who spoke at a conference on Wednesday, said the apex bank is playing its part in safeguarding the economy by maintaining consistently low and stable inflation. The South African Reserve Bank gradually raised interest rates by a cumulative 200 basis points since July 2014, in a bid to balance the need to fight price pressures with that of protecting the economy.
The governor expects urgent structural reforms which he said are needed to boost productivity.
South Africa’s economy is expected to grow by 0.6 percent this year as it continues to feel the impact of low commodity prices, El-Nino exacerbated drought, as well as policy uncertainties. These issues have unnerved investors.
Ratings agency Moody’s has lowered its outlook for the South African banking system to negative from stable, citing worsening operating conditions over the next 18 months.
Also, Thea Fourie, senior economist at IHS Global Insight noted in recent analysis released by the company that the weak GDP growth numbers assumed for the first quarter could push South Africa into recessionary conditions.
However, with President Jacob Zuma seemed to have now tightened his grip on the ruling African National Congress (ANC) and secured his office, he is expected to focus on the current economic realities and look for a way to pull South Africa out of its economic crisis.