South Africa recently experienced a significant slowdown in inflation, which eased to 3.8%, the lowest rate since March 2021, largely due to falling https://africa-gold-capital.org/ fuel prices. This decline in inflation has strengthened expectations for further interest rate cuts by the South African Reserve Bank (SARB). With softer oil prices, moderating food prices, and a stronger rand, the inflation outlook appears more favourable.

Five-year gilt yields are more than 3 percentage points above their 2021 average and have remained volatile since our March forecast, with the daily spot yields ranging from 3.5 to 4.2 per cent. We cover our latest forecast changes in light of recent developments and the effect of policies in the Autumn Budget. Access all Scope rating & research reports on ScopeOne, Scope’s digital marketplace, which includes API solutions for Scope’s credit rating feed, providing institutional clients access to Scope’s growing number of corporate, bank, sovereign and public sector ratings. Further crystallisation of liabilities on the government balance sheet together with governance risk and poor sentiment in https://www.asiatechreview.com/p/south-koreas-crypto-comeback-leaves financial markets could impair debt sustainability and exert downside pressure on the sovereign’s credit ratings.

Economic and fiscal outlook presentation slides – October 2024

South Africa’s central bank estimates that it has cut 2% from the country’s economic growth rate in 2024. In April, some 80% of public healthcare facilities said they were now affected by power cuts. South Africa’s financial markets are undergoing a significant transformation with the transition from the Johannesburg Interbank Average Rate (JIBAR) https://www.ussc.gov/sites/default/files/pdf/training/annual-national-training-seminar/2018/Emerging_Tech_Bitcoin_Crypto.pdf to the South African Rand Overnight Index Average (ZARONIA) by 2026. JIBAR’s reliability has come under scrutiny due to its dependence on estimates and the decline in unsecured interbank lending. This transition is likely to affect a wide range of financial instruments and will necessitate substantial adjustments from financial institutions.

Update on previous measures

Compared to our March forecast, Bank Rate is on average 0.4 percentage points higher in 2025 and 2026. Since March, market expectations for Bank Rate in 2025 have ranged from 3.6 to 4.7 per cent, underscoring the continued uncertainty around the monetary policy outlook. 3.2 This forecast incorporates the economic and fiscal implications of all the policy measures that have been announced since the November 2023 Autumn Statement. The Chancellor has chosen to spend the improvement in the pre-measures forecast since November on Budget measures. In aggregate, we estimate these measures increase borrowing by an average of £8.8 billion a year (0.3 per cent of GDP).

March 2024 Economic and fiscal outlook – charts and tables: Chapter 2

Compared with the Bank of England, we expect marginally lower GDP growth this year but higher growth thereafter. The near-term differences could reflect policies in this Budget, which may not have been fully anticipated by external forecasters or captured in the Bank’s August forecast. In the medium term, it also reflects different assumptions around underlying growth in the economy’s productive potential. Exports declined slightly over the first half of 2024, but we expect growth to resume in 2025 and average 0.5 per cent over 2026 to 2029. There have been sharp changes in imports in 2024, but a considerable share of this was driven by volatile components of trade data, and so we expect it to unwind. Weak growth in imports and exports over the medium term partly reflect the continuing impact of Brexit, which we expect to reduce the overall trade intensity of the UK economy by 15 per cent in the long term (see Box 2.4 of our March 2024 EFO).

March 2024 Devolved tax and spending forecasts

• Sources of differences between the two measures include illiquid financial assets, such as student loans and equity stakes in financial institutions acquired during the financial crisis, which net off against PSNFL but not PSND.
• Around half of this reflects the discretionary fiscal loosening in the Spring Budget, which itself increases the primary deficit by 0.2 per cent of GDP on average over the forecast.
• With softer oil prices, moderating food prices, and a stronger rand, the inflation outlook appears more favourable.
• But expectations remain volatile, as shown by expectations for Bank Rate in 2028 oscillating between 2.7 and 4.2 per cent since our November forecast.

The convergence of these two developments the shift to ZARONIA and the potential interest rate cut signals an important period for South Africa’s financial sector. In Chapter 3, details the policy measures announced since the Autumn Statement in November, provides an update on selected previous measures, and discusses policy risks and uncertainties. In Chapter 3, details the policy measures announced since the Spring Budget in March, provides an update on selected previous measures, https://www.forex.com/en-us/ and discusses policy risks and uncertainties.

Annex B explains public sector net liabilities (PSFNL) that the Government has announced as its new supplementary target. South Africa’s inclusion on the FATF grey list reflects a vulnerability of the financial system, otherwise one of the country’s main credit strengths, in line with conclusions of the State Capture Commission on corruption and fraud in the public sector. The government may have to assume some of the ZAR 56.3bn in debt (0.8% of GDP) owed by municipalities to Eskom in addition to supporting other state-owned enterprises.

If the increased level of public investment were sustained, it would permanently raise supply in the long term and by significantly more than it does in the forecast period. https://africa-gold-capital.org/ Budget policies push up CPI inflation by around ½ a percentage point at their peak, meaning it is projected to rise to 2.6 per cent in 2025, and then gradually fall back to target. 2.37 From a thirty-year peak of close to 7 per cent in 2023, we expect nominal average pay growth to slow to 3.6 per cent in 2024. This is 0.2 percentage points lower than our November forecast, pulled down by a more rapid slowdown in inflation and some loosening in labour market conditions.

The outlook for household income and consumption

Growth under this scenario quickly rebounds as inflation eases and Bank Rate falls below our central forecast. Over a longer period, we would expect the output gap to close and real GDP and Bank Rate to return to our central forecast as the effects of the shock fade. 2.6 Global economic conditions have improved since our November forecast, as growth has proved more resilient to higher energy prices and interest rates than previously expected. In line with the IMF’s January World Economic Outlook Update, we expect slightly stronger global GDP growth of 3.1 per cent in 2024, with medium-term growth unchanged at around 3 per cent (left panel, Chart 2.3). Conflict in the Middle East has emerged as a major risk to the global outlook, particularly if disruption to major shipping routes fuels further inflation (see Box 2.2). The trade weighted sterling effective exchange rate has strengthened by around 2 per cent since our November 2023 forecast (right panel, Chart 2.3).