Reserve Bank Governor Lesetja Kganyago says the extension of the lockdown period is expected to have a severe impact on the economy, with an expected increase in job losses.
His comments follow a unanimous decision by the bank’s Monetary Policy Committee to once again cut interest rates by one-percentage-point for the second time in less than a month.
This brings down the repo rate to 4.25%, the lowest rate ever recorded.
In this video, reaction to South African Reserve Bank emergency interest rate cut:
“South Africa’s lockdown has been extended by an additional fourteen days, bringing the total lockdown period to 35 days. Both the supply and demand side of this extension reduces growth and deepen it as businesses stay shut for longer and households with income spend less,” says Kganyago.
“This will likely increase job losses with further consequences for aggregate demand. The impact will be particularly severe for small businesses and individuals with earnings in the informal sector.”
Earlier, economist Azar Jammine said the unexpected interest rate cut would help indebted consumers and businesses to service their debts.
“It will only benefit those businesses who have not sought relief from their banks in this very tough times – those businesses that are still functioning well, but carry a lot of debt, but not in a desperate position. They will be the ones that benefit from this rate cut. For those in a desperate position, their real problem is if insufficient cash flow and not because they cant meet their interest payment.”
In this video, the Reserve Bank Governor, Lesetja Kganyago announces repo rate: