Growth and economic activity in SA slowed dramatically in past months, and it was now expected to average only around 3% in 2011 and around 3.5% in 2012, Owen said.

"The sharp slowdown in economic growth from around midyear, combined with the materially weaker global outlook, has resulted in us having to forecast a lower GDP growth trend over the next two years," Owen said.

Manufacturing output dropped 6% month on month in July, Owen said. He noted that strikes presented a major drag on output.

"However, even as the strikers returned to work, the Purchasing Managers Index only recovered modestly to 46.7 in August, up from 44.2 in July."

So far, mining data also pointed to a contraction, Owen said, leading one to anticipate a further slowdown in growth momentum to around 1% quarter on quarter in the third quarter, down from 1.3% in the second.

"The projection for markedly slower economic growth poses risks to the fiscal outlook with an expected widening in the deficit to around 5% of GDP this year and for 2012," suggested Owen.

On interest rates, BoE said that another rate cut was possible, but that a lot would depend on the rand's performance against major currencies.

"We remain of the view that continued accommodative monetary policy is exactly what is needed to ensure a sustained recovery in SA," Owen said.