Reserve Bank Governor, Lesetja Kganyago announced that the Reserve Bank will not be changing the repo rate this year.
The Repo rate will remain 3.5% per annum, as announced by Kganyago during a media briefing.
By the third quarter of 2020, South Africa's economy had grown by 66.1% quarter on quarter. This growth is in contrast to the Reserve Bank's expected growth of 50.3%.
The growth rate for the year is now expected to be -7.1%, compared to the expected contraction of 8% that was predicted during a meeting in November.
“However, our projection for the 4th quarter of 2020 is expected to be lower than previously forecast. And while lockdown restrictions currently in place are considerably less restrictive than in 2020, we expect growth in the first quarter of 2021 to remain muted,” said the Governor.
Kganyago said the meeting of the Monetary Policy Committee took place during the second wave when Covid-19 infections had peaked in South Africa as well as other countries.
He expects that the vaccine will boost growth on a global scale once it is rolled out in South Africa.
“It is expected that these waves of infection will continue until vaccine distribution is widespread and populations develop sufficient immunity to curb virus transmission. Although the virus will continue in new waves, the rollout of vaccines is expected to boost global growth prospects generally. We have therefore revised global growth for 2021 higher.”
However, the roll out of the vaccine on a global scale is likely to be very slow. This will create uneven global economic recovery for countries in 2021.
The International Monetary Fund (IMF) predicted the Gross Domestic Product (GDP) would contract by 4.4% in 2020 and expand by 5.2% in 2021.
Governor Kganyago said their new predictions will be released on 26 January 2021.