Roundup: South Africa's central bank cuts 2016 growth forecast to 0.6 pct

The South African Reserve Bank on Thursday cut the country's economic growth forecast for 2016 from 0.8 percent to 0.6 percent.

South African Reserve Bank governor, Lesetja Kganyago, said the revise was due to constrained global economic outlook and domestic factors.

He however said a recovery would be expected in the next two years.

The economic growth is expected to be 1.3 percent in 2017 and 1.7 percent in 2018, according to the central bank.

It also revised the inflation outlook from 6.6 percent to 6.7 percent this year. Inflation is expected to be at 6.2 percent in 2017 and 5.4 percent in 2018, according to the bank.

"Recent high-frequency data paint a particularly bleak picture of the first quarter of this year, following a sharp contraction in mining output, minimal growth in the manufacturing sector, and declines in electricity production and consumption," Kganyago said.

"The continuing drought is also expected to put further strain on the agricultural sector," he said.

South Africa, along with some other countries in southern Africa, is facing a prolonged drought, leaving over 3 million people in the country in need of food, according to the World Food Programme.

The central bank said the weak economic growth had led to the unemployment rate rising to 26.7 percent in the first quarter of 2016.

Kganyago said there was also a low household expenditure because of the subdued economic growth.

He expressed concerns that the inflation was outside the bank's target even though there was a moderate improvement.

He also cited risks like the earlier-than-expected tightening in US monetary policy and political uncertainty in South Africa.

The central bank however maintained the repo rate at seven percent to lure investors into the country.

Regarding global economy, on the positive side, Kganyago said the Chinese economy is responding positively to the policy reforms introduced by the government. Endit