BER: South African households revise 2026 inflation expectations lower
CNBC Africa is joined by Nicolaas van der Wath, Senior Economist, Bureau for Economic Research for this discussion.
Mon, 17 Mar 2025 10:57:17 GMT
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AI Generated Summary
- The downward revision of 2025 inflation forecasts reflects a declining trend in inflation over the past two years, signaling cautious optimism among households, analysts, and business people.
- The divergence in inflation expectations among different groups underscores the complexity of economic forecasting, with analysts adopting a positive stance and business people remaining cautious.
- The downward revision in wage growth projections aligns with inflation expectations, emphasizing the interconnected nature of economic indicators and the need for coherent policy interventions to support economic growth.
The South African economy is facing a complex landscape of challenges and opportunities, as revealed by the recent publication of the inflation expectations survey for Q1 2025 by the Bureau for Economic Research. Senior Economist, Nicolaas van der Wath, shed light on the key findings in an exclusive interview with CNBC Africa's Power Lunch Southern Africa. The survey highlighted a slight downward revision of the 2025 inflation forecast, indicating a potential shift in the economic trajectory. Van der Wath attributed this revision to the declining trend in inflation over the past two years, emphasizing that households, analysts, and business people are cautiously optimistic about the future outlook.
One of the noteworthy points discussed in the interview was the divergence in inflation expectations among different groups, including analysts, business people, and trade unions. While analysts adopted a more positive stance, attributing it to econometric modeling and interest rate analyses, business people remained cautious due to factors such as input costs and wage demands. This disparity underscores the importance of considering various perspectives to understand the complexities of economic forecasting.
Household inflation expectations also witnessed a significant downward revision, signaling a shift towards a more optimistic outlook. Van der Wath emphasized that the decline in inflation pressure experienced by households indicates a potential easing of monetary policy by the Reserve Bank. Furthermore, the downward revision in wage growth projections aligns with the overall inflation expectations, underscoring the interconnected nature of economic indicators.
In terms of economic growth projections, a downward revision from 1.5% to 1.2% for 2025 was attributed to ongoing challenges in infrastructure, new load shedding incidents, VAT hikes, and international trade uncertainties. Looking ahead to 2026, the forecast remains subdued at 1.4%, reflecting the lingering impact of global and local obstacles on South Africa's economic trajectory.
Van der Wath highlighted key policy interventions that could support stronger economic growth, including addressing mismanagement, promoting private sector participation in state-owned enterprises, and reassessing government's role in the economy. He underscored the importance of fostering a competitive business environment to drive sustainable growth amidst the prevailing challenges.
As the discussion veered towards monetary policy, the outlook appeared favorable for maintaining accommodative measures to anchor inflation expectations. With households indicating lower inflation forecasts and economic growth remaining subdued, Van der Wath suggested a potential room for interest rate reductions to support the economy. He cautioned against premature tightening measures, emphasizing the need to prioritize economic stability and consumer wellbeing.
In conclusion, the revised inflation expectations for 2026 underscore the evolving economic landscape in South Africa, characterized by a delicate balance of challenges and opportunities. The insights shared by Van der Wath offer valuable perspectives on the path forward for policymakers and stakeholders to navigate the complex terrain of the South African economy.