South Africa's growth outlook has deteriorated over the past few months, compounded by continued labour disruptions, the country's central bank said on Thursday.
Following a contraction of 0.6 percent in the first quarter, the outlook for the second quarter is expected to be positive, but subdued, particularly in the light of weak mining and manufacturing data in May, the South African Reserve Bank said.
The bank's latest forecast, which assumes a speedy resolution of the ongoing metalworkers' strike, sees growth in 2014 at 1.7 percent, compared with 2.1 percent previously and 2.8 percent at the beginning of the year.
Growth forecasts for the coming two calendar years have been reduced to 2.9 percent and 3.2 percent, from 3.1 percent and 3.4 percent respectively.
The bank's leading indicator of economic activity declined moderately, reflecting subdued growth expectations.
The weak business confidence is mirrored in the 2.6 percent growth in gross fixed capital formation in the first quarter of 2014. Growth in fixed investment by the private sector, which accounts for about two thirds of gross fixed capital formation, weakened further, from 2.4 percent in the fourth quarter of 2013 to 1.0 percent in the first quarter of 2014.
Gill Marcus, SARB Governor, said the bank's Monetary Policy Committee remains concerned about weak growth, widening output gap and the negative employment outlook
She said the strike in the platinum sector contributed to the downward revision of the growth forecast, and the latest forecast has not factored in the possibility of a protracted work stoppage by the metalworkers, which would potentially have much wider ramifications because of the direct linkages to other sectors of the economy.
"This weak growth outlook, however, is not something that monetary policy can ameliorate," Marcus said in a statement.
Given that the key headwinds preventing a return to trend growth are structural, there is an urgent need to implement necessary structural reforms, as envisaged in the National Development Plan, in order to achieve higher and more inclusive growth, she noted.