Sarb: SA growth outlook modest

Pretoria - The economic outlook for South Africa remains modest, with a gradual recovery in domestic demand and supply expected barring further global turbulence, the Reserve Bank said on Tuesday.

Inflation expectations remain relatively well anchored, with the main upside risk to the outlook emanating from the oil price, administered prices and the rand exchange rate, the bank said in its bi-annual monetary policy review.

"Increased uncertainty regarding Europe and associated global financial market turbulence has impacted on the perceived risks to the outlook for both domestic inflation and growth," it said.

"The probability of future growth and financial shocks emerging from global developments remains high."

While the inflation forecast appeared more favourable, there were renewed risks from a possible further weakening of the exchange rate, although this should be offset by weaker demand and lower commodity prices, particularly oil.

"Cost-push pressures emanating from international oil prices and the impact of changes in global risk perceptions on the exchange rate remain the central unknowns," the bank said.