SARB: Trade turmoil puts SA exports at serious risk

 In its latest Monetary Policy Review, the Reserve Bank warned that tariff hikes and economic fragmentation could derail key sectors like automotive, agriculture, and platinum group metals—raising the risk of job losses, plant closures, and a stalled recovery.

Platinum group metals, a key export, could face reduced demand as vehicle prices rise in the US due to added import costs.

This would further strain South Africa’s already fragile economy, potentially leading to job losses, reduced investment, and plant closures.

Despite these risks, the SARB remains cautiously optimistic, forecasting a 1.7% growth rate for South Africa in 2025.

This growth is attributed to ongoing domestic reforms in the energy and logistics sectors, as well as improvements in household disposable income.

Globally, inflation continues to show signs of easing, but challenges remain.

Global headline inflation fell from a peak of 8.6% in 2022 to 6.7% in 2023 and is expected to decrease further to 4.2% in 2025.

However, the SARB cautioned that the disinflation process is slowing, with new obstacles emerging.

Escalating trade tensions, rising tariffs, and increased geopolitical fragmentation could halt the global disinflation trend.

The SARB also highlighted that global economic policy uncertainty is at levels not seen since the COVID-19 pandemic, with rising tariffs likely to deepen economic fragmentation and disrupt supply chains.

 As a result, inflationary pressures could persist, and the risk of a global recession has increased.

Christopher Lowald, Head of Economic Research at the SARB, explained that the bank had modeled different scenarios, including higher tariffs on imports to the US, which could significantly drive up global inflation.

However, a quicker resolution of trade disputes and accelerated domestic reforms could help stabilize inflation and improve economic conditions.

DOMESTIC REFORMS SHOW PROMISE

On the domestic front, the SARB’s economic outlook remains cautious.

The bank noted that, despite the risks, the country’s economic activity is expected to be supported by structural reforms.

 These reforms include improving logistics, ensuring reliable energy supply, and restoring investor confidence.

In addition, the recent implementation of the two-pot retirement system, which allows for early access to savings, is expected to provide a short-term boost to household spending.

However, its long-term impact is likely to diminish over time.

While the SARB has cut interest rates and remains optimistic about growth in the short term, it has urged caution.

 The risks posed by global economic uncertainties, trade tensions, and domestic vulnerabilities require urgent action to secure South Africa’s economic future.

 The Reserve Bank remains focused on achieving price stability, but it emphasizes that addressing the underlying structural issues is key to ensuring long-term growth and stability.

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