HILARY JOFFE: Reserve Bank can do little about growth without structural reform
Economy's capacity to grow has been eroded over the years
Twice a year, the Reserve Bank holds a series of monetary policy forums designed to open its research and debates to a broader audience than the usual suspects in the media and the markets. This week's forum in Pretoria happened to come just after a leaked SACP document made a new call for changes to the Bank's mandate - urging that price stability come second to growth and employment priorities - and just before the ANC came out with its latest views on reforms to boost economic growth.
That growth desperately needs boosting is not in question, especially given the Bank's latest estimate of SA's potential growth rate, which has now fallen to a shockingly low 1%. Technically speaking, the potential growth rate is the rate at which an economy can grow without running into inflation problems. In effect, it is the trend growth rate, or "speed limit", the average rate the economy can sustain over a number of years through the economic cycle.