PRETORIA (Reuters) - A weaker rand and above-inflation wage increases could add to price pressures in the South African economy, the Reserve Bank said in its annual economic report on Tuesday.
The rand has lost 16 percent against the dollar this year, helping nudge consumer inflation towards the top end of a 3-6 percent inflation target.
This forced the central bank to keep rates unchanged at last week's bi-monthly policy meeting despite lacklustre economic growth, which the bank is forecasting at just 2 percent this year.
The weaker rand, high administered-price inflation and wage increases in excess of inflation were the main factors that could add to domestic inflationary pressure, the bank said in the report, which is mainly backward-looking.
The manufacturing sector, which accounts for 15 percent of GDP, remained susceptible to renewed weakness in the global economy, particularly in the key export market of Europe, it added.
An 8 percent manufacturing contraction in the first quarter slowed overall growth to an annualised 0.9 percent from 2.1 percent in the previous three months, leading to the bank trimming its 2013 growth forecasts.
However, it said the softer rand could provide a boost for manufacturing exporters.
The current account deficit was expected to narrow marginally in the first half of 2013 after a deterioration in 2011 and 2012, the central bank added.
Source: http://news.yahoo.com/south-africas-rand-wages-pose-inflation-risk-c-081956623.html
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