The latest Inflation Expectations Survey published by the Bureau of Economic Research (BER) indicates a slight decline in inflation expectations for the first quarter of 2024.
However, sentiments regarding South Africa's economic growth and currency outlook have soured among analysts, businesspeople, and trade union officials.
According to the BER's findings, the average headline Consumer Price Index (CPI) inflation expectations for both 2024 and 2025 have receded by 0.3 percentage points.
The respondents now anticipate inflation to average 5.4% in 2024, 5.3% in 2025, and 5.2% in 2026.
Notably, analysts are the only group among the three segments expecting inflation to dip below 5%, stabilising at 4.7% in 2025 and 2026.
In contrast, businesspeople and trade union officials foresee inflation persisting above the 5% mark, even into 2026.
The downward trend in inflation expectations is reflected in the one-year-ahead forecasts, with household expectations dropping from 7.2% in the fourth quarter of 2023 to 6.7% in Q1 2024.
However, there was a contrasting increase in the five-year-ahead expectations, rising from 10.2% to 10.4%, primarily driven by revisions from low-income households.
Despite the improved inflation outlook, concerns loom over South Africa's economic growth prospects.
The average forecast for economic growth in 2024 stands at a modest 0.8%, notably below the 1.0% predicted by international institutions such as the International Monetary Fund (IMF) and Deloitte.
This downward revision of 0.5 percentage points from the previous quarter reflects a growing pessimism, with trade union officials notably reducing their forecast from 1.5% to 0.5% for 2024.
Looking ahead, the three groups foresee a slight uptick in economic growth, with an average forecast of 1.1% for 2025. However, there are divergent views among them, with only analysts predicting growth above 1% in 2025.
Furthermore, expectations regarding the South African rand have worsened, with projections indicating a devaluation from R18.94/$ in 2024 to R19.26/$ in 2025.
Trade union officials exhibit the most pessimistic outlook, anticipating the rand to end 2025 at R19.87/$.
On a slightly brighter note, there is consensus among analysts, businesspeople, and trade union officials that salaries and wages will see modest increases of around 5% in both 2024 and 2025.
The mixed sentiments expressed in the BER's latest survey highlight the complex challenges facing South Africa's economy, including persistent inflation pressures, subdued economic growth prospects, and uncertainties surrounding the performance of the national currency.
These factors continue to shape stakeholders' expectations and perceptions of the country's economic trajectory in the near term.
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