Johannesburg – South African policy makers should “adjust the policy stance” and develop policies and regulations that will help SA better absorb the shocks of the global economic slowdown‚ Reserve Bank governor Gill Marcus told a business function on Tuesday.
Marcus said the spillovers of the global economic slowdown on SA were “profound” and needed to be addressed in order to improve confidence levels in the country.
The monetary policy committee's decision to keep interest rates unchanged at current levels last month “was not an easy one” given the deteriorating global economic outlook‚ said Marcus.
She noted that the domestic economic outlook was “beset” by its own challenges‚ some of which were caused by both the global and local economic slowdown.
The bank forecasts 2012 growth at 2.6%‚ rising to 3.4% next year “as the global economy starts to recover”, Marcus said.
Marcus‚ however‚ told the function that even these forecasts‚ which the bank recently revised downwards‚ were still “optimistic”.
Household spending continued to be the main driver of domestic growth‚ Marcus said‚ adding that private sector gross fixed capital formation remained weak.
Speaking on jobs‚ the governor said that while job creation had picked up‚ it had remained “sluggish”.
Analysts have cautioned that the current strikes in some sectors of the economy as well as steep wage increases could lead to job losses and constrain new job creation by companies.
Marcus reiterated the bank's concern over rising food and fuel prices‚ which she referred to as the main upside risks to the inflation outlook.
Inflation is expected to have bottomed out at 4.9% year on year in July.