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SA growth expectations declining despite repo rate drop - economist

Reserve Bank Governor Lesetja Kganyago announced on Thursday that the repo rate had been reduced by 25 basis points to 6.5%.

FILE: Reserve Bank governor Lesetja Kganyago. Picture: EWN.

JOHANNESBURG - While the repo rate announcement provides some relief for those in debt, there are still concerns about this year’s overall growth.

Reserve Bank Governor Lesetja Kganyago announced on Thursday that the repo rate had been reduced by 25 basis points to 6.5%. He attributed this cut to the drop in inflation, which was at 3.6% in November.

Kganyago said the Reserve Bank had dropped its economic growth forecast for 2020 to 1.2%.

“The forecast for 2020 and 2021 have also decreased to 1.2% and 1.6%, respectively, due to lower growth expected.”

But Kganyago said the GDP contraction in the third quarter of last year confirmed that the economy remained weak and vulnerable.

Chief economist at Alexander Forbes Isaah Mhlanga said the growth forecast by the bank was high.

“The economic growth expectations have declined further, with the potential for a technical recession if the December numbers for manufacturing comes out and are as weak as they were in November. We also have jobs bloodbath at companies like Telkom and Walmart.”