SA Reserve Bank hosts Monetary Policy Forum

The South African Reserve Bank (SARB) hosted the second of its Monetary Policy Forums for this year in the city last Thursday evening.
The meeting was chaired by SARB Deputy Governor Kuben Naidoo who was assisted by his Executive Assistant, Alex Smith. Naidoo and Smith used the SARB’s October 2016 Monetary Policy Review document to inform guests about the status of the world’s and in particular the South African economy.
According to the report, South Africa’s economy has decelerated steadily since 2011. Productivity growth has shifted to a lower level and investment growth has declined, with the private sector contracting.
As a result, the economy’s potential growth rate has weakened to approximately 1,4%. “With the growth rate falling below even these low levels in both 2015 and 2016, monetary policy has helped support demand with low real interest rates. Yet the fundamental problem is one of diminished potential, and restoring growth rates to historical averages will therefore require deeper structural reforms. Without such measures, the economy is expected to expand at rates between one and two per cent for the foreseeable future, generating little or no improvement in employment or individual living standards,” the report informed.
Smith said that the country’s worst drought in recent decades has lifted food prices, pushing food and non-alcoholic beverages inflation from 4,4% in the third quarter of 2015 to 10,8% in the second quarter of 2016. “Food inflation is likely to peak above 12% towards the end of 2016 and then fall to below 6% in the last few months of 2017, assuming more normal weather conditions and favourable base effects,” the report projected.
Core inflation is projected to increase from an average of 5,5% in 2015 to 5,7% in 2016 before moderating to 5,6% in 2017 and 5,2% in 2018. Even with this improvement, core inflation is still at its highest level since late 2009.

Story and photos: BARRY VILJOEN
>>barryv.observer@gmail.com

Featured photo: Deputy Governor of the SARB Kuben Naidoo and Executive Assistant Alex Smith, lead the meeting of the Monetary Policy Forum.