In the first quarter of 2023, the average inflation expectations of analysts, business owners and trade unions for 2023 and 2024 increased by 0.2 percentage points from expectations in the fourth quarter of 2022.
This data is based on a Bureau of Economic Research (BER) survey of inflation expectations in South Africa.
The survey forecasts average inflation of 6.3% in 2023 and 5.8% in 2024. Respondents expect inflation to decline to 5.5% in 2025.
While analysts forecast inflation of 4.6% – at the midpoint of the SARB inflation target range – in 2025, unionists expect 5.8% and businessmen 6.2%.
Average five-year inflation expectations remained unchanged at 5.5%.
Households’ one-year-ahead inflation expectations jumped from 6.3% to 7.0%. Similarly, their five-year expectations rose from 8.4% to 9.9%.
Respondents on average expect economic growth to be 1.0% in 2023, half the rate expected a quarter earlier. They expect economic growth to accelerate slightly to 1.5% in 2024.
Among the three social groups at the lower end, analysts expect 0.5% growth this year, with business owners at 1.0% and union officials at 1.4% at the upper end.
The low growth expectations are echoed by the Reserve Bank of South Africa (SARB).
Rashad Cassim, Deputy Governor of the Reserve Bank of South Africa, warned that they expect “disastrously low” economic growth rates for the next three years.
“Our growth rate also compares very poorly to the historical record. Since the 1960s, South Africa has managed, on average, to grow at about 2.8% per annum,” Cassim said.
“That is about four times the average growth rate of our forecast and the last ten years. This weak growth outlook is also related to other social ills, including our 33% unemployment rate.”
SARB Governor Lesetja Kganyago confirmed the experts’ predictions earlier this year.
While speaking to the CNBC-Africa chain at the annual World Economic Forum meeting in Davos, the Governor, said the SARB will continue to raise interest rates as long as inflation stays outside the target band.
He said inflation rose like a rocket last year, but declined much more slowly despite regular interest rate increases.
However, while the SARB may be gaining the upper hand on inflation, risks such as power outages that increase the cost of producing food and doing business denote that Kganyago is reluctant to move away from policy tightening.
“What we need to see is inflation falling steadily into the 3% to 6% inflation target range,” he said.
O Económico
