South African rates expected to be held as Ramaphosa seeks to reboot reform efforts

South Africa’s Reserve Bank will announce its first interest rate decision since President Cyril Ramaphosa’s African National Congress returned to power with a reduced majority in parliament.

The Bank is expected to leave interest rates unchanged at 6.75% as it manages escalating inflation and a weak economic growth outlook in the short-term.

Stagnant economic growth has plagued the South African economy in the last five years amid falling revenue and weakening state-owned companies. Economists have predicted that the first quarter under Ramaphosa’s new government will likely be disastrous economically as corruption and inefficient SOEs will take a long time to sort out. For the rest of the year, a higher risk of inflation and an extremely vulnerable currency has sparked worries of a recession.

Ramaphosa has made economic growth central to his political agenda, vowing to revive the country’s manufacturing sector and create a Presidential Economic Advisory Council with the purpose of delivering a new growth plan.

However, the fact that interest rates will not be cut either has restored some confidence in the economy. While recession may be in the near future for the economy, analysts expect that the worst may be over, and that the economy could start seeing growth by 2022.

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