South Africa’s outlook sours

As the global outlook darkens, things turn more sour for South Africa’s economy, says BNP Paribas chief economist for Middle East and Africa, Jeff Schultz.

“A developed market recession matters for South Africa: Our emerging market team’s analysis of sensitivities to growth slowdowns by key region indicate that South Africa’s own growth and activity is particularly well correlated with the US, showing a 1.3 percentage point impact on domestic growth from every 1pp change in US growth,” he said.

This view has been exacerbated by the temporary force majeure at key ports from industrial action early in the quarter. “We have argued extensively that we expect inflation to prove stickier than most expect in 2023, thanks to higher wage settlements, inventory restocking and weaker productivity. We maintain these views and forecast headline CPI inflation to moderate to an above-consensus 5.8% in 2023 from an estimated 6.8% in 2022,” it said.

As a result of this rather bleak outlook, the finance group said that South Africans should not expect the Reserve Bank to pivot from its rate hike cycle any time soon.

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