South African inflation to slow in 2024- Reuters poll
2023.12.13 04:11
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© Reuters. A woman prepares vegetables for customers at her stall in Thembisa, on the East Rand, in South Africa, August 2, 2023. REUTERS/Siphiwe Sibeko/File Photo
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By Vuyani Ndaba
JOHANNESBURG (Reuters) – Inflation in South Africa will slow next year as global trends weighing on prices’ growth combine with weak domestic consumer spending, a Reuters poll found.
From an estimated average of 5.8% this year, inflation is expected to decline to 5.0% next year and 4.5% in 2025, according to the median forecasts of 19 economists polled from Dec. 6-12. The latter would be right in the middle of the South African Reserve Bank’s (SARB) comfort zone of 3%-6%.
Jeffrey Schultz, chief economist at BNP Paribas (OTC:), wrote in a note that prospects for disinflation next year are even more compelling than before.
“On the supply side, we point out that easing global supply bottlenecks helping to push core goods prices lower in most regions, coupled with domestic input prices which entered deflationary territory back in July already, are likely to impact still sticky core goods prices into next year,” he wrote.
Schultz said he continues to see growing evidence of a lack of demand in the South African economy driving inflation down.
Still, similar to last month’s poll, the bigger risk on the timing of the first SARB interest rate cut is later rather than sooner, according to all but two of seven respondents to an extra question.
The SARB is expected to wait until May before cutting its repo rate as policymakers try to navigate risks to inflation and the timing of interest rate reductions in major economies. The U.S. Federal Reserve will wait until at least July, according to a slim majority of respondents in a separate Reuters survey.
After May, the SARB is forecast to cut in every quarter by 25 basis points in the forecast horizon until early 2025, eventually reaching 7.00% later that year. The repo rate is currently 8.25%.
The South African economy is expected to expand 1.3% next year, according to the median forecast, the same as last month’s poll and up from a 0.7% estimate for this year. Power shortages and logistical bottlenecks at ports are weighing heavily on economic output.
The economy is expected to grow 1.7% in the following year.
(For other stories from the Reuters global economic poll: (Full story))
(Polling by Vuyani Ndaba; Editing by Mark Potter)
