Inflation in South Africa is anticipated to decelerate next year due to the convergence of global trends impeding price growth and subdued domestic consumer spending, according to a poll conducted by Western media.
This year's estimated average inflation rate of 5.8% in South Africa is projected to decrease to 5.0% in 2024 and further drop to 4.5% in 2025. The latter figure falls within the South African Reserve Bank's (SARB) target range of 3%-6%.
One of the experts indicated in a note that the likelihood of disinflation in the upcoming year has become more compelling.
"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," Jeffrey Schultz, chief economist at BNP Paribas noted.
The economist maintained that there is mounting evidence indicating a dearth of demand within the South African economy, exerting downward pressure on inflation.
Despite the above, five out of seven respondents to an extra question expressed the view that the greater risk concerning the timing of the first SARB interest rate cut lies in the later rather than the sooner timeframe, mirroring earlier poll findings.
The prevailing expectation is that the South African Reserve Bank will defer its repo rate cut until May as policymakers endeavor to manage the risks posed by inflation and the temporal aspect of interest rate reductions in major economies.
Following May, it is forecasted that the SARB will reduce the repo rate by 25 basis points each quarter within the forecast horizon until early 2025, eventually reaching 7.00% later that year. The current repo rate stands at 8.25%.
The median forecast suggests that the South African economy is poised to expand by 1.3% in the coming year, aligning with last month's projection and marking an improvement from the estimate of 0.7% for the current year. However, the economy continues to grapple with the detrimental effects of power shortages and logistical obstacles at ports, which are significantly impeding economic output.
Projections indicate that the economy is expected to experience a growth of 1.7% in the subsequent year.