This comes as uncertainty around United States (US) tariffs weighs on the outlook, according to a Reuters survey published on Tuesday.
The median forecast from 26 economists surveyed between May 22 and May 27 now expects gross domestic product growth to come in at 1.2% this year, down from 1.5% last month and well below earlier predictions of 1.7%. Growth projections for 2026 have also been trimmed to 1.6%, a slight reduction from last month’s forecast.
Independent Economist, Elize Kruger said the trade tensions will have a broader impact on SA’s economy through its key trading partners. “The indirect consequences of the global trade war are likely to hurt more than the direct tariffs themselves,” she noted.
The concern stems from a US plan announced in April by President Donald Trump to impose a 31% tariff on SA exports, a move temporarily suspended for 90 days. While these tariffs directly affect roughly 8% of the country’s exports, sectors that benefit from duty-free access under the African Growth and Opportunity Act may face greater challenges.
Meanwhile, the SA Reserve Bank (SARB) is expected to lower its repo rate by 25 basis points to 7.25% at its upcoming meeting on Thursday. Inflation remains comfortably below the midpoint of the bank’s 3% to 6% target range.
Despite the likely rate cut this week, economists do not anticipate much change to the central bank’s medium-term policy. Most expect rates to stay at 7.25% until a further cut in November, a delay compared with earlier predictions for an easing early next year. Among 25 economists surveyed, 15 favour the quarter-point cut this week, nine expect rates to remain steady at 7.50%, and one predicts a larger 50 basis point reduction.
Inflation, measured by the consumer price index, is forecast to average 3.5% in 2025 before rising to 4.2% in 2026 and 4.4% in 2027, still within the SARB’s target band but edging upwards. April’s inflation rate was recorded at 2.8%, with quarterly averages expected to rise slightly before approaching the target midpoint in the coming years.
The central bank has kept the repo rate unchanged since March, citing risks from the US-China trade war and domestic budget disagreements.
In Cape Town last week, National Treasury presented a revised budget for the third time after two previous attempts were delayed by disagreements within the ruling coalition. The latest version made only minor adjustments to spending and deficit projections.
Barclays economist Michael Kafe said the SARB has room to cut rates by 25 basis points, despite recent hints from the Deputy Finance Minister that an announcement on inflation targets may be forthcoming.
--ChannelAfrica--
