South African Reserve Bank Keeps Main Interest Rate at 3.5%

JOHANNESBURG--The South African Reserve Bank on Thursday held its main interest rate unchanged at 3.5%, but warned that recent riots in the country could have lasting effects on job creation and investor confidence.

More than 270 people died in the violence and looting last week that followed the arrest of South Africa's former President Jacob Zuma. Prior to the unrest, the bank had planned to raise its forecast for gross domestic product growth for this year, thanks to a better-than-expected performance in the first quarter, Governor Lesetja Kganyago said. Instead, the bank kept its 2021 GDP growth forecast at the 4.2% predicted at its last meeting in May.

"Recent unrest and economic damage could have lasting effects on investor confidence and job creation," Mr. Kganyago warned. "The direct and indirect costs of recent events will likely further slow South Africa's economic recovery," he added.

The bank kept its forecast for GDP growth in 2022 at 2.3%. Mr. Kganyago said he expects the South African economy to only return to its pre-pandemic level some time in 2023.

South Africa is also grappling with a new surge in coronavirus infections, driven largely by the Delta variant.

The SARB has cut its repo rate by a total of 3 percentage points since January 2020 to provide cushioning. The country went through its deepest recession since at least 1946, with GDP shrinking 7% in 2020. Mr. Kganyago reiterated that it will continue to maintain accommodative policies through the end of 2022.

Statistics South Africa said Wednesday that consumer inflation for June eased to 4.9% from the 30-month high of 5.2% recorded in May.

Write to Aaisha Dadi Patel at aaisha.dadipatel@wsj.com


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  07-22-21 0953ET
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