South African government’s efforts to cushion the economy from the effects of Covid-19

SOUTH AFRICA - Report 26 Mar 2020 by Iraj Abedian

The South African government has been announcing numerous measures aimed at mitigating the profound effects of Covid-19 the country is already experiencing. The South African Reserve Bank has become a major role player in these efforts. The bank began with a 100 basis point cut in interest rates last week. The last time the Reserve Bank cut the repo rate this significantly was during the great recession – it cut rates by 100 bps four consecutive times starting from February 2009 to May 2009. By the end of that easing cycle, the Bank had cut the benchmark interest rate from 12% starting from December 2008 to 5% in July 2012.

On March 19, the Bank’s Monetary Policy Committee (MPC) communicated that its forecast model indicated more cuts in the near future (see our Report of March 19, 2020). South Africa’s economy is likely to experience a deep recession, and the South African Reserve Bank is likely to engage in an extensive monetary policy easing over the period ahead.

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