The International Monetary Fund’s First Deputy Managing Director Gita Gopinath praised South Africa’s central bank for being proactive in raising interest rates but said energy and logistics challenges were restricting growth.
Gopinath told Reuters in an interview that the strategy followed by the South African Reserve Bank (SARB) was “appropriate”, pointing to the fact that inflation was now back within the target range.
Inflation fell within the 3%-6% band in June for the first time since April 2022.
In July, the central bank paused its rate hiking cycle after raising the main lending rate by a cumulative 475 basis points to 8.25% since November 2021.
The SARB has been criticised for its restrictive policy position when the economy has struggled to grow and inflation has been driven by supply-side constraints.
“We believe that the central bank has done the right things in terms of raising interest rates to … ensure that inflation doesn’t go very high,” said Gopinath on the sidelines of a SARB conference in Cape Town.
While Gopinath lauded the central bank, she cautioned that ongoing electricity and logistics constraints would hurt South Africa’s growth outlook.
The struggling state-owned power utility, Eskom, has been forced into constant power cuts as aging infrastructure fails to meet demand.
The SARB has estimated that this has not only cut growth forecasts by up to 2 percentage points, but added to inflation as well.
Logistical challenges from the port and rail authority have also limited the ability of key export commodities reaching their final destinations.
“Clearly the growth we are projecting at 0.3% this year is because of the energy crisis,” said Gopinath, adding logistics constraints were equally dragging down growth.
“On logistics … if there is liberalisation that … brings in private sector participation, that is another area which can raise growth,” she said.
South Africa’s first-quarter GDP grew by a marginal 0.4% with the second quarter figure expected on Tuesday.