S.African growth to flatline in 2016: central bank

Johannesburg (AFP) - South Africa's central bank Thursday cut its 2016 growth forecast to zero percent, as the continent's most advanced economy struggles with high unemployment, a severe drought and global uncertainty.

Reserve Bank governor Lesetja Kganyago said the domestic outlook remained "extremely challenging" after GDP contracted by 1.2 percent in the first quarter of the year.

"Domestic growth has surprised further on the downside, and the outlook remains constrained," said Kganyago.

"The bank's latest forecast is for zero percent growth in 2016, compared with 0.6 percent previously."

Earlier this month, the International Monetary Fund (IMF) cut its 2016 forecast to 0.1 percent growth -- adding that the figure was far below the country's population growth of 1.7 percent.

The Reserve Bank said the outlook was also clouded by uncertainty around the global implications of the British vote to leave the EU.

As expected, the bank kept its key interest rate unchanged at 7.0 percent despite concern over inflation of 6.3 percent, which is outside the target range of between 3 and 6 percent.

South Africa last month avoided a credit downgrade to junk status by S&P Global Ratings as the government tries to convince investors that its policies will foster future growth.

The dire economic situation has undermined President Jacob Zuma's government, with many of his party's supporters among the poor who have been hit by a lack of jobs and inadequate basic services such as water and sanitation.

Violent protests have erupted in some areas ahead of municipal elections on August 3.