A recent survey by BER indicates a fall in South Africa’s inflation forecast for 2025 to 4.3%, below the Reserve Bank’s target. Current inflation stands at 3.2% as analysts predict cautious movements in monetary policy amid VAT discussions and political tension. Economic growth predictions lag behind government expectations with a forecast of 1.2% for 2025.
The Bureau for Economic Research (BER) reported a decline in the average inflation forecast for South Africa, indicating a projection of 4.3% for 2025, down from 4.5% previously. This forecast is now below the South African Reserve Bank’s target of 4.5%, which is the midpoint of its 3%-6% target band.
In January, headline consumer inflation rose slightly to 3.2% year on year, with February’s figures expected to remain similar. Economists anticipate that the Reserve Bank will maintain its rates during the next policy meeting, despite current global trade tensions and discussions surrounding a potential hike in value-added tax (VAT).
The forecast for inflation in 2026 remains steady at 4.6% according to the BER survey. Analysts, reflecting optimism among the surveyed groups, predict inflation at 3.9% for the current year and 4.3% for next year. However, the overall economic growth forecast stands at a modest 1.2% for 2025, trailing behind the government’s allocation of 1.9% in last week’s budget.
The budget proposal has faced significant contention among political parties, primarily due to a controversial plan to increase VAT, presenting a challenge for South Africa’s coalition government as it navigates through these discussions.
The South African inflation forecast has been adjusted downward, now anticipated at 4.3% for 2025, indicating a cautious approach by analysts and business respondents. Despite slight increases in consumer inflation and upcoming rate decisions, the economic growth outlook remains subdued at 1.2%, highlighting the complexities within the current political and economic landscape. This backdrop underscores the challenges facing South Africa’s coalition government as budgetary proposals are met with resistance.
Original Source: www.zawya.com
