S African economy faces instability – Kganyago

13 August 2015

South Africa’s economy faces a turbulent time ahead as the prospect of interest rate normalisation in the United States and a slowdown in China’s growth complicate policy, Reserve Bank Governor Lesetja Kganyago said on Tuesday.

Kganyago also said China’s devaluation of its currency to stem an economic slide would boost the competitiveness of local manufacturing exports to the world’s second largest economy.

The South African Reserve Bank raised domestic rates for the first time in a year in July despite lacklustre growth, citing inflationary pressure partly stemming from a weaker rand.

The rand has weakened nearly 10% against the dollar this year, undermined by investors selling off emerging markets on expectations that the US Federal Reserve will soon start tightening policy.

“The global economy is entering into new unchartered waters with the prospect of normalisation in the US and a slowdown in China, impacting on commodity prices,” Kganyago said. “The reality, is that South Africa, along with other emerging market economies, is likely to face an increasingly turbulent time ahead.”

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