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Downgrades not good for SA

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JOHANNESBURG — Wage strikes in South Africa, credit rating downgrades and a widening current account deficit do not bode well for inflation, Reserve Bank deputy governor Daniel Mminele said on Wednesday.

JOHANNESBURG — Wage strikes in South Africa, credit rating downgrades and a widening current account deficit do not bode well for inflation, Reserve Bank deputy governor Daniel Mminele said on Wednesday. Report by Miningweekly

The central bank left its main interest rate unchanged at 5% last week, warning about the impact of above-inflation wage settlements aimed at calming the worst mining unrest since apartheid.

“Alongside a less favourable outlook for inflation, the domestic growth outlook has deteriorated, not only due to developments in the eurozone and United States but intensified further by labour market instability,” Mminele said in the text of a speech posted on the bank’s website.

The strikes, which hit output in the world’s biggest platinum producer and triggered rating downgrades from Moody’s and S&P, were the main reason for third-quarter gross domestic product growth slowing to 1,2% from 3,4% in the second quarter.

“The negative impacts of the strike action on growth have not fully fed through and we are likely to see further weakness in the quarter ahead,” Mminele said in the speech prepared for a business dinner.