The average inflation forecast for South Africa in 2025 has fallen to 4.3% from 4.5%, according to a recent BER survey. Despite a slight increase in January’s inflation to 3.2%, analysts expect a stable economic growth forecast of 1.2% for 2025. The Reserve Bank’s cautious approach is driven by global trade tensions and potential VAT hikes. Meanwhile, the government faces significant political challenges regarding its budget plan.
The average inflation forecast for 2025 in a prominent survey conducted by the South African Reserve Bank has decreased to 4.3%, a drop from the previous forecast of 4.5%. This survey, carried out by the Bureau for Economic Research (BER), reflects the views of analysts, business officials, and trade union representatives. The Reserve Bank aims to maintain inflation near its target midpoint of 4.5%, within a range of 3% to 6%.
In January, headline consumer inflation slightly rose to 3.2% year on year. The February inflation report is anticipated to reflect a similar figure, with economists indicating that the central bank will likely pause its series of interest rate cuts during its upcoming meeting. The Reserve Bank’s governor has emphasized the need for a cautious monetary policy due to risks arising from global trade tensions and potential local VAT increases.
The forecast for inflation in 2026 remains stable at 4.6%, as indicated by the BER survey. Among the surveyed groups, analysts maintain the most optimistic outlook, projecting inflation rates of 3.9% this year and 4.3% for the following year. Furthermore, the economic growth forecast for 2025 is a modest 1.2%, which is below the government’s projection of 1.9% as outlined in the recent budget report.
The budget itself faces significant challenges, notably a contentious VAT increase plan rejected by various political factions, representing a critical juncture for South Africa’s coalition government. The current economic climate demonstrates the intricacies of managing inflation and growth amidst political and global economic uncertainties.
The decline in inflation forecasts for 2025 indicates growing optimism among analysts and business leaders, albeit within a cautious monetary landscape. The Reserve Bank’s aim to maintain a stable inflation rate amidst potential global economic disruptions remains crucial. The ongoing debate over the VAT increase illustrates political challenges that could impact fiscal policy and economic growth in South Africa.
Original Source: www.zawya.com
