SARB economic outlook includes several cautionary notes‚ says academic

Although the Reserve Bank’s Monetary Policy Committee’s decision on Tuesday to leave interest rates unchanged was widely expected‚ the realistic and comprehensive assessment of the economic outlook by SARB Governor Lesetja Kganyago included several cautionary notes.

That’s according to North West University School of Business and Governance economist Professor Raymond Parsons.

“To begin with‚ the SARB has again lowered its forecast for economic growth in 2016 to 1.1% and it emphasises that the growth outlook remains well below potential. There was also reference to the low level of fixed capital investment‚ especially by the private sector‚ and of the need to implement structural reforms to improve investor confidence.

“Then the MPC statement also referred to expected tax increases in the forthcoming Budget which may dampen consumption expenditure‚” Parsons said.

“With a troubled economy and a small tax base‚ there remains an acute challenge in the 2017/18 Budget on how to best balance the State’s books without damaging growth and employment. The risk of getting it wrong‚ while trying to do the right thing‚ is real.

“Finally‚ while the SARB hopes that both inflation and interest rates in SA may now have peaked‚ it recognises that global uncertainty may yet cause the best forecasts to be wrong‚” Parsons added.