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Pretoria - While the impact of the global crisis on growth in South Africa is unlikely to be as severe as in other countries thanks to its relatively unaffected banking system, the local economy cannot expect to be immune from these developments.
This is according to the South African Reserve Bank (SARB) in its latest Monetary Policy Review (MPR) released on Tuesday.
In the review the SARB said whereas initially the crisis appeared to be confined to financial markets, the turmoil has directly affected the real sectors of a number of advanced economies.
The SARB feels that its own policymaking is set to be complicated "for some time" as a result.
However, it adds that the strong domestic infrastructure expenditure programme is also likely to "help underpin growth".
The SARB notes that one of the consequences of the financial turmoil has been a decline in commodity prices.
"From a narrow inflation perspective this means that one of the biggest risk factors to the inflation outlook has subsided significantly," it says.
The SARB feels that this factor, in conjunction with the widening output gap and subdued household consumption expenditure, indicates that some of the pressures on inflation "may be abating".
However, another risk has emerged in the form of the rand exchange rate which, along with other emerging-market currency exchange rates, has been negatively affected by the global turmoil.
"The impact of the exchange rate on the inflation outlook will depend, to a significant degree, on the extent to which these new levels are sustained," said the central bank.
While inflation is set to return to the 6%- 3% range in the second quarter of 2010, the SARB says that in a world of "heightened turmoil and uncertainty", the risks to the outlook are "amplified".
"Monetary policy will continue to focus on the expected medium-term inflation outcomes and will act appropriately to ensure that inflation returns to within the inflation target range over a reasonable time frame," are the concluding remarks of the SARB in its MPR.
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