The South African Reserve Bank (SARB) is forecasting growth to rise to 1.7 percent in 2025, despite the downside risks.
The central bank released its monetary policy review for April 2025 noting that South Africa’s growth remains below its historical average of 2.5%.
Estimates for this year are also far lower than the average for emerging markets of 4.2%.
The SARB suggests that domestic growth can be boosted further by adopting policy measures that permanently lower inflation risks and strengthen competitiveness.
Reserve Bank Governor Lesetja Kgyango says: “Here at home, we have seen significant progress on this inflation since last October, along with notable headway on the energy and logistics front with inflation and inflation expectations that have behaved. We lowered borrowing costs and this will support economic activity.”
The central bank notes that household spending is expected to underpin economic activity in the near and medium term, benefitting from low inflation and reduced borrowing costs.
Head of Economic Research at the SARB, Christopher Lowald, says: “In the January 2025 MPC meeting, we looked at a higher tariff scenario, 10 percentage points on all imports to the US and that’s the blue line and you get a stronger pickup inflation from that because it’s across the board worldwide. And then we looked at what would happen to inflation from a speedier resolution and a strengthening of the reforms. And you get a bit of an inflation improvement as you might expect.”
The bank says that early access to retirement savings through the two-pot system is set to continue with the impact likely to diminish over time.
On the heightened global trade tensions and tariffs, the SARB says this could push inflation back up, as Lowald further elaborates.
“The economic policy Uncertainty Index has now reached levels consistent with the COVID environment and quite a lot above what we saw in the global financial crisis. Now that in its own terms isn’t something to necessarily get too worried about, except it says again something about the way in which analysts and the markets are understanding the world around them and they’re very uncertain about it.”
To strengthen growth, the Reserve Bank recommends long-term policy reforms like fixing logistics, ensuring energy reliability, and boosting investor confidence.
VIDEO | SA Reserve Bank announces its Monetary Policy Committee decision:
https://www.youtube.com/watch?v=zh6LKnGo6Ws
