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South African Reserve Bank Holds Rates, Raises 2021 Growth Forecast

By Aaisha Dadi Patel

 

JOHANNESBURG--The South African Reserve Bank on Thursday held its main interest rate unchanged at 3.5% and revised its growth expectations for 2021 upward.

The SARB said it now anticipates that Africa's most developed economy will grow 4.2% this year, up from the 3.8% forecast in March. The bank forecast gross domestic product growth for 2022 at 2.3%, down slightly from the 2.4% forecast previously.

"The stronger growth forecast for 2021 reflects better sectoral growth performances and a more robust terms of trade in the first quarter of this year," said Governor Lesetja Kganyago.

South Africa continues to battle the coronavirus pandemic, with health officials warning that infections may spike again as the winter season sets in and a vaccination rollout is only just starting.

"The steady rate of vaccination in many countries has lifted projections for global economic growth and boosted confidence, significantly," said Mr. Kganyago. "Vaccination rates have not been uniform, however, with many emerging and developing countries lagging behind. Until vaccination is widespread and populations develop sufficient immunity to curb virus transmission, it is expected that waves of infection will continue."

The SARB has cut its repo rate by a total of 3 percentage points since January 2020 to provide some cushioning while the country went through its deepest recession since at least 1946, with GDP shrinking 7% in 2020. The bank has reiterated that it will continue to have accommodative policies to stimulate economic growth.

Statistics South Africa said Wednesday that consumer inflation was at 4.4%, the highest recorded since the implementation of lockdown measures due to the coronavirus pandemic and nearly at the midpoint of the SARB's target range of 3%-6%.

 

Write to Aaisha Dadi Patel at aaisha.dadipatel@wsj.com

 

(END) Dow Jones Newswires

May 20, 2021 09:54 ET (13:54 GMT)

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