The governor of South Africa’s central bank has stated that while the country’s economic outlook is better this year than last, the picture of inflation is more hazy due to numerous risks.
In an interview with Reuters during the World Economic Forum’s annual meeting in Davos, Switzerland, South African Reserve Bank (SARB) Governor Lesetja Kganyago stated that the continent’s most industrialised economy could grow by nearly 2% in 2025, as opposed to the 1.1% growth anticipated in 2024.
“Depending on who is forecasting, growth varies between 1.6% and 2% (this year). We think … it would be closer to 2% than closer to 1.6%,” he told the Reuters Global Markets Forum.
According to Lesetja Kganyago, one of the main factors facilitating faster growth was the establishment of a broad coalition government last year.
“The structural reform agenda has gained momentum, and it has been given impetus by this Government of National Unity with a very clear focus on taking South Africa’s economic trajectory to the next level,” he said.
The business-friendly Democratic Alliance is part of the coalition that formed after the long-ruling African National Congress lost its parliamentary majority, along with numerous smaller parties from various political backgrounds.
Investors are hopeful that reforms in important areas like freight rail, electricity, and the visa system will speed up and raise the annual growth rate above the pitiful 1% it has averaged over the last ten years.
Kganyago cautioned that with United States President Donald Trump back in the White House, protectionist policies could cloud South Africa’s inflation outlook.
According to him, there are “too many moving parts” to have a clear picture of price pressures because of additional risks like the rand exchange rate, the price of oil globally, and local food prices.
November 2024’s annual consumer inflation rate of 2% was below the SARB’s target range of 3% to 6%; however, it is anticipated to increase in December and average roughly 4% to 5% this year, which is the middle of the range the bank strives for.
At its final two 2024 meetings, the SARB lowered interest rates, and many analysts anticipate doing so again at its first announcement of the year.