In January, the South African Reserve Bank came out with its dire prognosis for the health of the country’s economy — forecasting GDP growth of just 0.3% in 2023
Consumer price inflation, coming in at 5.9% in March, is once again dangerously close to breaching the ceiling of the South African Reserve Bank’s target range.
According to Statistics South Africa, which released the figures on Wednesday, inflation ticked up from 5.7% in February and was driven by elevated food and transport costs. The last time inflation came in at 5.9% was in December last year. That reading marked the highest annual increase since March 2017, when inflation last breached the Reserve Bank’s 3% to 6% target range.
Elevated inflation has emerged as a stubborn feature of the global economy’s recovery from the Covid-19 onslaught. A spike in demand, as the economy has roused from its pandemic-induced slump, was accompanied by sustained supply-chain disruptions, driving inflation.
In South Africa, inflation has been at or above the Reserve Bank’s 4.5% midpoint target for 12 consecutive months and is expected to stay elevated for the near future.
According to the bank’s monetary policy review, released last week, headline consumer price inflation is projected at 5.8% in 2022 — well above the 4.9% forecast in January this year. Inflation is predicted to breach the upper limit of the bank’s target range in the second quarter of this year and is expected to return to the target midpoint in 2023.
Globally, inflation numbers have surprised on the upside, bucking expectations by many central banks that elevated prices would be transitory.
Last week, the Bureau of Labour Statistics in the United States showed that inflation stateside climbed to 8.5% in March, marking the highest levels since December of 1981. In the United Kingdom, inflation rose to 7% in March up from 6.2% in February, marking the sharpest increase in prices for 30 years.
Russia’s invasion of Ukraine has caused the inflation outlook to become even more uncertain and has been flagged by a number of monetary policymakers as a major source of concern. The war caused the price of crude oil futures to skyrocket, which have held above $100 a barrel for the majority of the period since the invasion.
In its World Economic Outlook, released on Tuesday, the International Monetary Fund (IMF) noted that the conflict will contribute to a significant slowdown in global growth in 2022 and add to inflation.
Global growth is projected to slow from an estimated 6.1% in 2021 to 3.6% in 2022 and 2023, according to the report. Meanwhile, war-induced commodity price increases and broadening price pressures have led to 2022 inflation projections of 5.7% in advanced economies and 8.7% in emerging market and developing economies.
The IMF has projected that South Africa’s consumer prices will average 5.7% in 2022 and drop to 4.6% in 2023.