{"id":824462,"date":"2025-05-19T13:00:00","date_gmt":"2025-05-19T11:00:00","guid":{"rendered":"https:\/\/businesstech.co.za\/news\/?p=824462"},"modified":"2025-05-19T13:02:30","modified_gmt":"2025-05-19T11:02:30","slug":"the-tide-is-turning-for-south-africa-2","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/business\/824462\/the-tide-is-turning-for-south-africa-2\/","title":{"rendered":"The tide is turning for South Africa"},"content":{"rendered":"\n

Despite projections of a slowdown along with the global economy, there are signs that South Africa\u2019s economic growth is starting to improve from previous years.<\/p>\n\n\n\n

According to S&P Global Ratings, South Africa\u2019s real GDP is expected to grow between 1.3% and 1.6% annually from 2025 to 2027\u2014more than double the agency\u2019s estimated growth of just 0.6% for 2024.\u00a0<\/p>\n\n\n\n

While the country needs to stimulate more growth to stage a more pronounced turnaround, it points to a significant rebound in medium-term prospects. <\/p>\n\n\n\n

The easing of load-shedding, which has long undermined productivity and investor confidence, is a key driver behind this improved outlook.<\/p>\n\n\n\n

S&P has affirmed South Africa\u2019s long-term foreign and local currency debt ratings at \u2018BB-\u2019 and \u2018BB\u2019, respectively, and kept its outlook positive. <\/p>\n\n\n\n

The agency noted that the positive stance reflects the potential for growth to outperform expectations if the government continues to work on important changes.<\/p>\n\n\n\n

While unemployment remains stubbornly high, easing the cost-of-living crisis may help improve policy persistence.<\/p>\n\n\n\n

However, the ratings agency said much of this depends on South Africa\u2019s Government of National Unity (GNU) stability. <\/p>\n\n\n\n

Disagreements with coalition partners around hiking VAT forced the government to amend and re-table the budget for fiscal year 2025. <\/p>\n\n\n\n

It will be presented for the third time on May 21. Despite the significant disagreements around the budget, the GNU has remained intact, which is a good outcome for the country.\u00a0<\/p>\n\n\n\n

The re-tabling of the budget and the removal of VAT are positive signs, while the government plans to continue with fiscal consolidation.\u00a0<\/p>\n\n\n\n

S&P also praised South Africa\u2019s access to deep domestic markets for financing and its ongoing debt consolidation efforts. <\/p>\n\n\n\n

It also indicated that a track record of effective reforms could lead to a rating upgrade in future. <\/p>\n\n\n\n

However, the agency cautioned that the outlook could be revised to stable if governance and economic reforms stall or infrastructure bottlenecks worsen.<\/p>\n\n\n\n

Good news for the rand<\/h2>\n\n\n
\n
\"\"<\/a>
Investec Chief Economist, Annabel Bishop<\/em><\/figcaption><\/figure><\/div>\n\n\n

According to Investec\u2019s chief economist Annabel Bishop, another good sign is the positive reaction from markets to talk of lowering the country\u2019s inflation target.<\/p>\n\n\n\n

Inflation is currently below 3.0% year-on-year, but is projected to average 4.5% over the medium term. <\/p>\n\n\n\n

The Finance Department is reviewing the inflation target. Deputy Finance Minister David Masondo said that a narrower band or even a point target may soon replace the existing 3% to 6% range.<\/p>\n\n\n\n

\u201cA narrower inflation band of 3-5% y\/y or less would reduce the likelihood of any interest rate cuts this year,\u201d said Bishop. <\/p>\n\n\n\n

The reduced likelihood of rate cuts and expectations of looser monetary policy in the US have widened the interest rate differential in South Africa\u2019s favour. This has boosted the rand to a five-month high of R17.99\/USD. <\/p>\n\n\n\n

Bishop added that if the government announces the new inflation target in the upcoming budget presentation, the rand could strengthen further as markets price in a more stable and lower inflation environment.<\/p>\n\n\n\n

A sustained lower inflation rate would benefit the rand on a PPP (Purchasing Power Parity) basis,\u201d she said. <\/p>\n\n\n\n

This means that if inflation stays low, the rand could be worth more based on buying power than other currencies.<\/p>\n\n\n\n

She explained that a lower rise in the cost of living would help improve real incomes, boost household spending, and support stronger economic growth. <\/p>\n\n\n\n

While the upcoming April inflation print is expected to remain below 3.0% y\/y, inflation is forecast to rise toward 4.5% by December due to base effects. <\/p>\n\n\n\n

However, Bishop highlighted that although inflation is expected to rise a little by the end of the year, it might not rise as much as expected. <\/p>\n\n\n\n

\u201cIf the rand stays strong and oil prices stay low, inflation could remain under control.\u201d<\/p>\n\n\n\n

She noted that the Reserve Bank has expressed a preference for a point target, possibly as low as 3.0%, rather than a range. <\/p>\n\n\n\n

If implemented, this would mark a significant policy shift to anchoring inflation expectations more firmly. <\/p>\n\n\n\n

\u201cThe key event will be the release of new targets for monetary policy. The interest rate outlook will depend on when the target changes are announced,\u201d said Bishop. <\/p>\n\n\n\n

With inflation expectations moderating and the currency gaining ground, the economy will benefit from enhanced purchasing power, more predictable interest rate policy, and a boost in overall consumer and investor confidence. <\/p>\n\n\n\n

These developments, taken together, suggest that South Africa could turn a corner in the second half of 2025.<\/p>\n","protected":false},"excerpt":{"rendered":"

Despite some persistent headwinds and economic challenges, there are signs that South Africa could turn a corner in the second half of 2025.<\/p>\n","protected":false},"author":92,"featured_media":813796,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[9872],"tags":[1498,11019,3670,11765,22583],"class_list":["post-824462","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business","tag-investec","tag-mpc","tag-rand","tag-sp-global","tag-the-finance-department"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/824462","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/users\/92"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/comments?post=824462"}],"version-history":[{"count":5,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/824462\/revisions"}],"predecessor-version":[{"id":824638,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/824462\/revisions\/824638"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media\/813796"}],"wp:attachment":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media?parent=824462"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=824462"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=824462"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}