Surprisingly high inflation figures from the US this week and the expectation that the US Federal Reserve will further increase interest rates in response will have a ‘spillover’ effect on South Africa, says finance minister Enoch Godongwana.
Speaking to Bloomberg TV at the sidelines of the G20 conference in Bali on Friday (15 July), Godongwana said this was due to how closely tied South Africa is with the global economy.
“Because South Africa’s economy is highly integrated into the global economy, whatever happens in the global economy will have spillover (effects) into the local economy. The content and nature of (this spillover) we don’t know at this stage – but it will impact (us).”
“Generally because you have seen a rising inflation rate it will have an impact on poorer nations, but in the case of South Africa we have been prudent fiscally over the past few years. We don’t have that much challenge and anticipate reaching a budget surplus within the next 10 years.”
Speaking on the ongoing load shedding in the country, Godongwana noted that this was a challenge South Africa has been grappling with for the last 14 years, with the outages costing about 40% of the country’s economic performance over that time.
He said that the government is working on several emergency interventions to address the load shedding crisis, including emergency procurement of new capacity and emergency maintenance. He added that president Cyril Ramaphosa will be addressing the nation on these interventions ‘in due course’.
Despite the power cuts and ongoing global energy crisis, Godongwana said Treasury’s GDP and inflation estimates remain unchanged, with the South African Reserve Bank forecasting inflation of 5.1% this year, with inflation also expected to remain below the 6% level in 2023.
“Our key problem is a growth issue and unemployment. There are a number of challenges that impact us in reigning in debt, but we are carefully watching those downside risks and building p appropriate buffers to deal with that.”
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