South African Inflation Forecast Dips Below Reserve Bank Target…

The average inflation forecast for South Africa in 2025 has dropped to 4.3%, below the Reserve Bank’s target. Current inflation is at 3.2%, with economic growth predictions falling short of government estimates. The situation raises concerns over monetary policy and fiscal strategies in the coalition government.

The Bureau for Economic Research (BER) has reported a decline in the average inflation forecast to 4.3% for 2025, down from 4.5% in the previous quarter. This prediction is notably below the South African Reserve Bank’s target of 4.5%, which sits at the center of its 3%-6% target range. Current headline consumer inflation stood at 3.2% year on year as of January, with February data expected to mirror this figure.

Economists anticipate that, despite this static inflation forecast, the South African Reserve Bank may continue its rate-holding stance due to concerns regarding global trade conflicts and the likelihood of a VAT increase. The BER survey also indicated that the inflation forecast for 2026 remains steady at 4.6%. Respondents predict inflation rates of 3.9% for this year and 4.3% for next year.

Moreover, the respondents have projected an average economic growth estimate of 1.2% for 2025, which is significantly lower than the government’s forecast of 1.9%. This discrepancy presents a challenge as the South African coalition government faces opposition concerning the contentious VAT increase proposed in the recent budget.

In summary, the South African inflation forecast has declined to 4.3% for 2025, indicating a need for the Reserve Bank to remain vigilant amidst global trade tensions. Economists project stable inflation for subsequent years and lower economic growth than government predictions, highlighting ongoing fiscal challenges within the coalition government over planned VAT increases.

Original Source: www.zawya.com