## South Africa: Selected Issues

_IMF Staff Country Reports, January 30, 2020_

## Source details

**Canonical URL:** [South Africa: Selected Issues](https://www.imf.org/en/publications/cr/issues/2020/01/29/south-africa-selected-issues-49004)

## Other formats

- [Markdown version](/en/publications/cr/issues/2020/01/29/south-africa-selected-issues-49004/index.md)
- [Structured JSON version](/en/publications/cr/issues/2020/01/29/south-africa-selected-issues-49004/index.json)
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## Bibliographic details
- Published: January 30, 2020
- Series: IMF Staff Country Reports
- DOI: https://doi.org/10.5089/9781513528519.002

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### Overview
- Publication date: January 30, 2020
- Focus: the growth-inflation trade-off of monetary policy in South Africa.
- Core question: whether anchoring inflation expectations at a lower level imposes a growth trade-off in the current environment of low growth and persistent inflation expectations.

### Key findings
- There is limited growth trade-off of monetary policy efforts to anchor inflation expectations at a lower level at present.
- Monetary policy lends limited support to growth that is dampened by structural issues.
- During the 2010s, domestic demand growth responded little to monetary policy action.
- The environment of weak growth, low interest rates, and relatively moderate inflation (expectations) could have muted monetary policy transmission.
- Inflation expectations continue to respond to monetary policy action albeit to a lesser extent.
- Monetary policy transmission through demand has weakened:
  - demand growth does not systematically respond to monetary policy action, and
  - core inflation does not systematically respond to monetary policy action.
- The exchange rate and credibility channels appear to remain operational.

### Policy recommendations and implications
- The South African Reserve Bank should continue its efforts of anchoring inflation and inflation expectations at a lower level because the growth trade-off appears limited at present.
- Ultimately, constraints to economic growth need to be removed to restore stronger policy transmission and support growth.

### Transmission channels and dynamics
- Weakened channels:
  - Demand channel: muted—domestic demand growth showed little responsiveness to monetary policy during the 2010s.
  - Core inflation channel: muted—core inflation does not systematically respond to monetary policy action.
- Operational channels:
  - Exchange rate channel: appears to remain operational.
  - Credibility channel: appears to remain operational.
- Contextual factors:
  - Weak growth environment
  - Low interest rates
  - Relatively moderate inflation and inflation expectations

### Subjects and keywords (as listed)
- Subjects: Currencies, Depreciation, Foreign exchange, Inflation, Money, National accounts, Prices, Private investment, Production, Total factor productivity
- Keywords: administered price inflation, Africa, CR, Currencies, demand growth, Depreciation, Global, growth-inflation tradeoff, Inflation, inflation expectation, ISCR, monetary policy, monetary policy action, Private investment, rand, rand volatility, Total factor productivity

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## Content in this bundle

- **South Africa: Selected Issues; IMF Country Report No. 20/34; January 9, 2020**
  - [South Africa: Selected Issues; IMF Country Report No. 20/34; January 9, 2020 (Markdown version)](/-/media/files/publications/cr/2020/english/1zafea2020002.pdf.md){rel="alternate" type="text/markdown"}
  - [South Africa: Selected Issues; IMF Country Report No. 20/34; January 9, 2020 (PDF)](/-/media/files/publications/cr/2020/english/1zafea2020002.pdf){rel="external" type="application/pdf"}

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_Source: https://www.imf.org/en/publications/cr/issues/2020/01/29/south-africa-selected-issues-49004_