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Busa endorses rates decision

Jul 19 2013 13:28 Sapa

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Johannesburg - The SA Reserve Bank's (Sarb's) decision to leave the repo rate unchanged was the correct one, Business Unity South Africa (Busa) said on Friday.

"Busa shares the sober assessment of the economic and business outlook given by the monetary policy committee (MPC) and remains concerned at the weak economic situation revealed by it," special policy adviser Raymond Parsons said in a statement.

"It is clear that macro-economic vulnerabilities are becoming more apparent, and of particular concern is the increase in youth unemployment."

The bank announced on Thursday that the repo rate remained unchanged at 5%.

"While the upside risks to the inflation outlook reduce the scope for further accommodation, a tightening of the monetary policy stance does not automatically follow," governor Gill Marcus said.

"This will be highly dependent on how we see the inflation trajectory unfolding in this very uncertain environment."

Marcus said the bank's MPC continued to face conflicting policy choices relating to rising inflation and slowing growth.

Parsons said the dilemma remained balancing lower growth with rising inflation. Busa considered that policy makers were facing increasingly tough decisions.

He said Busa had revised its growth forecast for 2013 from 2.2% to 2%. This was in line with the MPC's updated forecast and with downside risks.

"Busa sees fixed investment as likely to be negatively influenced by low business confidence, as well as by extended electricity supply constraints and uncertainties," said Parsons.

"One immediate priority for South Africa in addressing the current trends is to expedite the roll-out of the planned infrastructural spending in ways that would help to underpin growth, investment and employment under these challenging economic circumstances."

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sarb  |  busa  |  gill marcus  |  raymond parsons  |  repo rate
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