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Several factors hinder SA's economic growth

Economists have raised concerns over issues affecting the country's economic growth.

Picture: Christa Eybers/EWN

JOHANNESBURG - Economists say a combination of factors are preventing the country's economy from growing with major concerns about the rand.

South African Reserve Bank Governor Lesetja Kganyago announced yesterday that the repo rate would remain unchanged at seven percent, but he warned that the Monetary Policy Committee (MPC) would not hesitate to change its position.

Kganyago says a weak rand combined with high oil prices is not good news for consumers.

"Domestic petrol prices have increased by accumulative R1 per litre since March."

He adds low household expenditure is one indication that growth remains low.

"Household consumption expenditure also remains subdued with low growth in retail sales in the first quarter."

Standard Bank chief economist Goolam Ballim says there also other pressures facing the economy.

"There's pressure especially from food, oil and the potential from a weaker rand is weighing on the prospects for near-term inflationary spikes."

Investment Solutions' Lesiba Mothatha says political instability is also a major problem.

"Seemingly, political situations are becoming a problem in terms of how the Department of Finance is looked at."

Independent economist Thabi Leoka says the slow growth rate was taken into account when deciding to keep the repo rate unchanged.

"Growth is still a problem, inflation is not increasing as much as we had expected and there's room to pause, and they took that opportunity."

There is a general consensus that political instability, drought, higher oil prices and rising inflation are just some of the main factors stopping growth.

It's hoped that despite these pressures, inflation will continue to stabilise.

SUBSTANTIAL FUEL PRICE INCREASES EXPECTED IN JUNE

Kganyago has warned of a substantial fuel price increase next month, due to the unstable rand and rising oil prices.

He says a number of factors are affecting the local currency and fuel prices are a concern.

The governor says low oil prices had been helping the petrol price, but the scenario has changed.

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