Millions Raised
Photo Cred: Pexels

The Bank says that monetary policy can ease financial conditions and improve the resilience of households and firms to the economic implications of COVID-19.

 

South Africa (14 April 2020) – The South African Reserve Bank has cut the repo rate by 100 basis points.

“This takes the repo rate to 4.25% per annum, with effect from 15 April 2020. The decision was unanimous,” Governor of the South African Reserve Bank, Lesetja Kganyago, said in a statement on Tuesday.

He said the implied path of policy rates over the forecast period, generated by the Quarterly Projection Model, indicates five repo rate cuts of 25 basis points, extending into the first quarter of 2021.

“Monetary policy can ease financial conditions and improve the resilience of households and firms to the economic implications of COVID-19. In addition to the continued easing of interest rates, the Bank has taken steps to ensure adequate liquidity in money and government bond markets, and to ease capital requirements to free capital for on-lending by financial institutions,” Kganyago said.

He said each of these steps makes more capital available to households and firms.

“Monetary policy, however, cannot on its own improve the potential growth rate of the economy or reduce fiscal risks. These should be addressed by implementing prudent macroeconomic policies and structural reforms that lower costs generally, and increase investment opportunities, potential growth and job creation,” he said.

The International Monetary Fund (IMF) estimates that global growth will contract by about 2.9% as a result of the COVID-19 pandemic, which has spread globally, and its impact is being felt through all economies.

“The COVID-19 outbreak will have a major health and social impact, and forecasting domestic economic activity presents unprecedented uncertainty. With that in mind, the Bank expects GDP in 2020 to contract by 6.1%, compared to the -0.2% expected just three weeks ago. GDP is expected to grow by 2.2% in 2021 and by 2.7% in 2022,” Kganyago said.

South Africa’s lockdown was recently extended by an additional 14 days, bringing the total lockdown period to 35 days.

“Both the supply and demand effects of this extension reduce growth and deepen it in the short-term, as businesses stay shut for longer and households with income spend less.

“This will likely also increase job losses, with further consequences for aggregate demand. The impacts will be particularly severe for small businesses, and individuals with earnings in the informal sector,” Kganyago said.

He said current indications from the World Health Organisation are that the pandemic is unlikely to end quickly, with shorter, less virulent waves hitting over time.

“The uncertainties of the crisis have led to extremely high volatility in financial asset prices, with sharp and deep market sell-offs followed by a partial recovery. At this stage, the sustainability of that recovery remains uncertain, and global markets remain in risk-off mode.

“This has implications for emerging markets and South Africa in particular, as investor appetite for rand-denominated equities and bonds is expected to remain weak,” the Governor said.


Sources: SA Government 
Don’t ever miss the Good Things. Download the Good Things Guy App now on Apple or Google
Have something to add to this story? Share it in the comments or follow GoodThingsGuy on Facebook & Twitter to keep up to date with good news as it happens or share your good news with us by clicking here
Click the link below to listen to the Good Things Guy Podcast, with Brent Lindeque – South Africa’s very own Good Things Guy. He’s on a mission to change what the world pays attention to, and he truly believes that there’s good news all around us. In the Good Things Guy podcast, you’ll meet these everyday heroes & hear their incredible stories:
Or watch an episode of Good Things TV below, a show created to offer South Africans balance in a world with what feels like constant bad news. We’re here to remind you that there are still so many good things happening in South Africa & we’ll hopefully leave you feeling a little more proudly South African.

About the Author

Brent Lindeque is the founder and editor in charge at Good Things Guy.

Recognised as one of the Mail and Guardian’s Top 200 Young South African’s as well as a Primedia LeadSA Hero, Brent is a change maker, thought leader, radio host, foodie, vlogger, writer and all round good guy.

Leave a Reply

Your email address will not be published. Required fields are marked *