South African Reserve Bank Governor Gill Marcus says emerging markets will be faced with a difficult year ahead due to global economic contractions.
South Africa falls under emerging economies and has, due to domestic issues related to labour unrests, seen its growth slow down to 0.6% in the first quarter of 2014.
Releasing the Reserve Bank’s annual report for 2013/ 14 on Wednesday, Marcus said in her foreword that while the bank did not have the mandate or policy levers to address some of the issues, it will continue to play its part in supporting the economy.
“Emerging markets in general are likely to face a difficult year, characterised by depreciating currencies, volatile capital flows, rising inflation and slowing growth, as some of the advanced economies normalise their monetary policies.
“However, the Bank will continue to play its part in supporting the economy through these difficult times by maintaining its focus on price and financial stability in support of sustainable economic growth,” she said.
As a result of these difficult times, some of which include damaging strikes in the mining sector and motor-vehicle subsectors, the economy slumped and household consumption expenditure and investment growth are expected to slow amid a weak business confidence.
This caused the Reserve Bank’s Monetary Planning Committee (MPC) to lower its growth forecast for 2014 from 2.6% to 2.1%.