While South Africa’s inflation is expected to climb down to 6.4% for the rest of 2016, the nation’s economy has been revised down to a 0.5% growth for 2016.
The inflation downing follows the Consumer Price Index (CPI) breach of the upper limit of the 3% to 6% target band in the first half of 2016. Higher petrol and food prices facilitated the climb.
National Treasury identified
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“The inflation forecast has been revised down to 6.4% for 2016 due to lower-than-expected electricity and import-price inflation. A further decline to 6.1 percent is expected in 2017.
“Inflation is expected to stay within the target band in 2018 and 2019,” stated the National Treasury as it indicated that rising unit labor costs, higher import-price inflation and inflation expectations are upside risks to the forecast.
Although South Africa’s economic growth has been revised down to grow at a rate of 0.5%, Treasury indicated that growth is expected to increase.
It stated: “growth is expected to increase to 2.2% by 2019, supported by more reliable electricity supply, improved labor relations, low inflation, a recovery in business and consumer confidence, stabilizing commodity prices and stronger global growth.”
It added that the nation requires higher growth to achieve the goal of economic transformation and build an equitable society.
“Without decisive action, a protracted period of low growth will set back the country’s ability to realize the constitutional vision to ‘improve the quality of life of all citizens and free the potential of each person’.”
Afterwards, Treasury warned that countries that are highly reliant on foreign savings like South Africa, “will remain vulnerable to global financial volatility and rapid capital outflows.”
It called for a greater economic integration with the rest of Africa saying it would enable export-orientated South African firms to capitalize on stronger pockets of growth and increase their share of African trade.