South African Reserve Bank governor, Lesetja Kganyago, says that while a decision by Britain to exit the European Union will impact economic growth locally, it will not lead to a recession.
Speaking to Bloomberg TV in Portugal, Kganyago said: “We would not venture into a recession at this stage, but there is no doubt that it will slow the South African economy from the weak growth that we already have.”
Bloomberg reported that South Africa’s economy shrunk by 1.2% in the first quarter, while gross domestic product is expected to grow by as little as 0.8% in 2016, according to the central bank – the slowest pace since a 2009 recession.
Britain voted last week in a referendum to leave the EU, wiping billions of dollars off world equity markets, with local markets also left reeling until a mild recovery on Tuesday.
“It has affected sentiment and investors were looking for safe assets. We are not seen as one of the safe assets,” Kganyago said.
The Reserve Bank governor said that Brexit is unlikely to affect the central bank’s interest-rate outlook, expected next month – on 21 July.
“There are so many moving parts at the moment,” he said. “In looking at the effect of the global economy on South Africa we look beyond the UK.”
On Wednesday morning, the rand tested a move below R15 (15.02) against the dollar, 1% firmer than the previous session.
The local unit was also stronger against a battered pound, at R20.09, and was trading at R16.68 against the euro.
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