Economists are concerned about the Reserve Bank’s latest growth projections. This follows the bank’s prediction that the economy will grow by only 0.3% this year due to the severity of the rolling blackouts.
Economists say this could be a sign that South Africa is nearing the end of the interest rate hiking cycle – as inflation is slowing.
The central bank expects consumer inflation to average 5.4% this year. Reserve Bank governor Lesetja Kganyago says there are upside risks to the inflation outlook – mainly from the impact of the continued Russia war in Ukraine, electricity and other administered prices and oil prices.
Economist at Sanlam Investments, Arthur Kamp says the economy has stalled.
“It’s essentially saying that the economy has stalled – no growth at all they did revise from 1.1. So, what they are saying is subtract over 2% they have factored recent round of load shedding which has intensified. It’s very difficult to tell what the level of load shedding this year will be. The economy has become more efficient. Uses less electricity … unit of GDP.”
Chief Economist at Old Mutual Johann Els says, “I think that lower inflation will be of some benefit to consumers. I know that there is lots of pressure around electricity price increases etc, but again lower inflation this year compared to much higher inflation last year and even though interest rates are high, they are just a little bit above what they were pre-covid overall for consumers. Maybe this year might turn out to be not as bad as many people feel certainly not great.”
Kganyago says lower household spending will also contribute to lower economic growth this year. Despite lower economic projections, the bank hiked the repo rate by 25 basis points.
This has added to the worries of hard-pressed consumers, whose financial problems have been exacerbated by rolling blackouts that have forced some businesses to close.
The African National Congress (ANC) says it will apply its mind to the Reserve Bank’s recent interest rates hike.
Speaking to the media on the sidelines of the induction of new ANC NEC members in Ekurhukeni, party Secretary General Fikile Mbalula says their interest is to cushion the poor from the worsening economic conditions.