Inflation in South Africa is expected to decline further in a major survey

In the first quarter of this year, the central bank’s widely followed survey’s average inflation projection for 2025 fell even more, falling short of the bank’s target level.

Analysts, entrepreneurs, and trade union officials now anticipate inflation of 4.3% in 2025, down from 4.5% in the previous survey, according to the Bureau for Economic Research (BER).

Opening a new tab, headline consumer inflation increased somewhat to 3.2% year over year in January (ZACPIY=ECI), the most recent month for which data is available.

Although Reuters polled economists think the central bank will stop its rate-cutting cycle on Thursday, February inflation data is scheduled to be released on Wednesday and is predicted to be close to 3.2%.

The governor of the South African Reserve Bank, which is renowned for its prudent monetary policy, has emphasized in recent weeks the dangers posed by regional value-added tax (VAT) increases as well as difficulties in international commerce.

According to the BER study, analysts, entrepreneurs, and labor unions all predicted inflation would average 4.6% in 2026.

Of the three groups polled, analysts are still the most bullish, predicting inflation to be 3.9% this year and 4.3% next.

In contrast to the 1.9% increase the government projected in last week’s budget, respondents’ average economic growth projection for 2025 was 1.2%.

In the largest test yet for South Africa’s coalition government, the budget is still stuck since the majority of political parties have rejected it due to a controversial plan to hike VAT.