In its 2011/12 annual report, the central bank reiterated
that the domestic growth outlook had deteriorated mainly due to global
uncertainties, saying it had trimmed its forecasts.
“The global environment continues to provide an uncertain,
unstable and risky backdrop against which price and financial stability in the
domestic economy have to be maintained,” Governor Gill Marcus said in a
statement accompanying the report.
The Reserve Bank has kept its repo rate unchanged at 5.5%
since November 2010 to try and boost economic growth, which it now sees at 2.9%
in 2012 from an earlier forecast of 3%.
The Treasury sees growth at 2.7% this year.
Inflation has slowed to within the central bank’s 3%-6%
target range, hitting 5.7% year-on-year in May from 6.1% in April and raising
expectations the central bank may have room to cut interest rates this year.
While oil was previously seen as the main upside risk to the
inflation outlook, this year’s depreciation of the rand in response to global
risk aversion had more recently made currency weakness the main upside risk,
the Bank said on Wednesday.
The rand hit a three-year low of R8.71 against the dollar
last month on global fears of contagions from debt problems in the eurozone,
South Africa’s biggest trading partner bloc.
However, it has since rallied, towards the psychologically
key R8.0 level against the dollar.
South Africa's banking system remained stable and well
capitalised with minimal exposure to peripheral eurozone economies, the Reserve
Bank added.
The Bank also said it was continuing a policy of building
reserves to try and contribute to greater stability in the foreign exchange
market and had purchased approximately $4bn of foreign exchange in the
financial year under review.
The Bank has repeatedly said it does not target a level for the currency since trying to influence the exchange rate would be too costly.