The Governor of the Reserve Bank, Lesetja Kganyago, has expressed concern about the slow economic growth in the country. He said despite the slow growth, the domestic economy is expected to grow by 1.1% this year, rising to 1.7% by 2026. He attributed some of these to load shedding and logistical challenges. Kganyago was addressing the SARB Ordinary General Meeting of shareholders in Pretoria.
“Despite varied sectoral performances, output in the South African economy slowed to 0.7% in 2023 from 1.9% in 2022 and remains well below growth in peer emerging markets. Load-shedding and logistical challenges have been weighing heavily on economic activity, depressing the credit appetite of businesses and the spending of households. Despite such weak growth in output, however, employment levels have recovered the 2.2 million jobs lost during the height of the pandemic. As of the first quarter of this year, total employment surpassed its 2019 level,” said Kganyago
The Governor also emphasized that job creation has been too slow and not enough to offset the growth in the labour force, leaving the unemployment rate elevated at 32.9% in the first quarter of this year.
Kganyago said that exports also suffered over the past 12 months from energy and logistics challenges as much as price factors.
“Imports were also muted by logistics. As energy and logistics constraints continue to ease, the growth outlook will also improve. The domestic economy is expected to grow by 1.1% this year, rising to 1.7% by 2026, as both household spending and investment start to strengthen,” explained Kganyago.
Kganyago also warned that the country’s continuous grey listing by the Financial Action Task Force (FATF) is also posing a risk to the economic outlook.
“South Africa is still confronted with its government’s growing debt levels and ever higher debt-servicing costs, as well as domestic financial institutions’ high exposure to that debt. The SARB continues to monitor this sovereign-financial sector nexus closely. Although we are working hard to exit the Financial Action Task Force (FATF) grey list, the effects of being grey listed are being felt as foreign counterparties apply greater scrutiny to our domestic institutions,” highlighted the Governor.
The Governor warned that the effects of climate change are becoming more frequent and more severe, as highlighted by the recent storms that hit some parts of the country.
Kganyago also mentioned that inflation remains a major policy concern for central banks globally, and not only in South Africa.
