South Africa's central bank does not see second-quarter economic contraction

[July 27, 2018]  PRETORIA (Reuters) - South Africa's central bank Governor Lesetja Kganyago said on Friday he does not expect economic growth to contract in the second quarter, after a 2.2 percent contraction in the first quarter of this year.

Africa's most industrialized economy grew by 3.1 percent in the final quarter of 2017, but contracted in the first quarter of this year.

"At this stage, the high-frequency data for the second quarter indicate that a modest improvement is likely in the quarter, and the South African Reserve Bank (SARB) does not expect a second consecutive quarter of contraction," Kganyago said at the bank's annual general meeting.

Last week, the bank held benchmark interest rates and cut its growth forecast for 2018 to 1.2 percent from 1.7 percent.

It said economic activity would be constrained in the near term by weak consumer spending linked to the recent increase to value added tax and by unemployment, which is near record levels.

On Friday, Kganyago said growth of 1.9 percent is expected in 2019, while the forecast for 2020 remains unchanged at 2.0 percent, he said.

"At these growth levels, we cannot expect to make appreciable inroads into the unemployment problem of the country," Kganyago said.

South Africa's unemployment rate stands at a near-record 27 percent.

(Reporting by Olivia Kumwenda-Mtambo; Editing by James Macharia)

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