Inflation is expected to rise to 4.5 % in 2021 due to pressures from food and energy prices, the National Treasury said on Thursday (11 November).<\/p>\n
Tabling the Medium-Term Budget Policy Statement (MTBPS) in the National Assembly finance minister Enoch Godongwana said, however, that inflation is expected to remain contained over a three-year period.<\/p>\n
Inflation refers to an increase in the general level of prices.<\/p>\n
\u201cInflation is projected to reach 4.5 % in 2021, reflecting upward pressure from non-core inflation \u2013 specifically food and energy prices \u2013 while core inflation remains subdued.<\/p>\n
\u201cBeyond 2021, inflation is expected to remain well contained within the target range, approaching 4.5 % in the outer years. Risks to the inflation outlook are primarily in the near term and assessed to the upside, mainly stemming from non-core inflation.\u201d<\/p>\n
Household consumption expected to grow<\/strong><\/p>\n Following a Coronavirus-induced decline in 2020, the National Treasury said household consumption is expected to grow by 5.7 % in 2021.<\/p>\n \u201cIt is supported by improved earnings and growing credit extension, which is linked to low-interest rates. Nonetheless, the value of household consumption remains 1.4 % below pre-pandemic levels, weighed down by lower spending on semidurable goods such as clothing.\u201d<\/p>\n National Treasury said the Covid-19 lockdowns disproportionately affected lower-income households. \u201cWhile 94 % of workers with graduate qualifications reported receiving their full salaries in the second quarter of 2021, only 86 % of workers with matric or less reported receiving the same.<\/p>\n \u201cMore than three-quarters of post-pandemic job losses have been in lower-earning positions. Furthermore, fewer than 8% of employees in these positions were able to work from home during lockdown periods.\u201d<\/p>\n National Treasury said the easing of lockdown restrictions and the reinstatement of the special Covid-19 social relief of distress grant until March 2022 will support spending for lower-income households in particular through the rest of 2021.<\/p>\n \u201cOver the [next three years], persistently high unemployment will continue to weigh on the recovery. Renewed restrictions in response to additional waves of Covid-19 infections would pose a significant downside risk to household incomes and spending.\u201d<\/p>\n Treasury’s warning comes at a time when the country’s fuel prices are at record highs, and heading towards R20 per litre for petrol, unemployment is at a record high, electricity prices continue to rise well above inflation, despite constant blackouts, and food prices continue to rise.<\/p>\n
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