SA policy options constrained, says Marcus

Speaking at the ORT SA Fundraising dinner in Sandton, the governor said the global environment was likely to remain difficult for several years, and that an early resolution to the economic crisis was unlikely due to "a lack of trust" on a number of levels, including in the leadership of the Eurozone to take difficult decisions.

The impact of the global downturn on South Africa was already evident, with growth being below potential and moderating, as well as a progressive downward revision of growth forecasts.

The bank had forecasted a growth rate of 3.9% for 2012 and 4.4% for 2013. Recent forecasts now predict growth of 2.7% and 3.8% respectively for the two years.

"In such an environment, South Africa's policy options are constrained. However, we cannot just sit back and hope that the world will somehow turn around. And when it does turn around, we should be well-positioned to take advantage of the improved situation," said Marcus.

"Macroeconomic policies can help to alleviate the cyclical elements of any possible downturn but both monetary and fiscal policies have less room for manoeuvre than was the case in 2008," noted Marcus.

She said the recent monetary easing to cut the repo rate from 5.5% to 5% should be viewed in the context of alleviating strains in the economy.

"We emphasised that monetary policy cannot solve the underlying problems of the economy which will still exist even if the global economy recovers sooner than expected," she added.

It was necessary to recognise the nature of the challenges facing the economy, stressing that the continued focus on infrastructure was essential as it would provide jobs and help alleviate constraints to growth and exports.

She said the problems of the global economy should be an impetus for action.

"We need to find ways to minimise the negative impact of the prevailing crisis and be ready to take advantage of the global recovery when it comes. Policy consistency and coordination is essential if we are to achieve a growing economy and significantly reduce unemployment," said the governor.