Covid-19 will have ‘major health and social impact’ - SARB
South African Reserve Bank governor Lesetja Kganyago has warned that the Covid-19 pandemic will have a major health and social impact.
The central bank’s Monetary Policy Committee cut the repo rate by a further 100 basis points on Tuesday.
The 100 basis point cut follows a similar cut in March and a 25 basis points cut in January.
This brings the repo rate, at which the central bank lends money to commercial banks, down to 4.25%.
Kganayago - at a press briefing on Tuesday - said the decision was a unanimous one.
ALSO READ: Reserve Bank sees 6.1% GDP fall
"South Africa's risk profile has increased, despite this, the committee knows that the more prolonged the lockdown and slower recovery create downside risks to inflation and allows further space for monetary policy to respond to various induced demand shock to the economy.
"Barring severe and persistent currency and oil shocks inflation is expected to be well contained remaining below the midpoint of the target in 2020 and close to the midpoint in 2021".
Kganyago said the two weeks extension to the lockdown will have a severe impact on small businesses.
"Both the supply and demand effects of this extension reduce growth and deepen it in the short-term, as businesses stay shut for longer and households with income spend less.
"This will likely also increase job losses, with further consequences for aggregate demand. The impacts will be particularly severe for small businesses, and individuals with earnings in the informal sector."
Kganyago admitted that it is impossible to predict the impact on the unemployment rate.