SARB warns of 0.7% GDP contraction amid global uncertainty
The South African Reserve Bank (SARB) has issued a stark warning about the country's economic future, citing rising global risks and ongoing domestic challenges.
In its latest Monetary Policy Review (MPR) for April 2025, the SARB painted a bleak picture, forecasting a potential GDP contraction of nearly 0.7% if a combination of global shocks were to hit.
This includes the scrapping of preferential trade access to the United States, a tariff shock, and a sharp depreciation of the rand—all of which could disrupt South Africa’s vulnerable economy.
CALL FOR DIPLOMATIC ACTION
The bank has urged increased pressure on President Cyril Ramaphosa to act quickly to repair diplomatic ties with the US and safeguard key trade agreements.
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SARB noted a significant decline in inflation in the second half of 2024, with headline inflation dropping from 6.0% in 2023 to 4.4% for the year.
This improvement was driven by lower fuel, food, and core prices, leading to a more optimistic outlook.
As a result, the MPC decided to cut interest rates by 50 basis points, lowering the repo rate to 7.5% between October 2024 and March 2025.
MODERATE INFLATION OUTLOOK FOR 2025
Looking ahead, the SARB projects that headline inflation will average 3.6% in 2025 and revert to around the 4.5% target midpoint by 2026.
However, despite the cooling of inflation, risks remain high. Geopolitical tensions, rising tariffs, and persistent inflationary pressures in major advanced economies continue to cloud the global economic landscape.
“The risks to inflation and economic growth have heightened, especially as global economic uncertainty has increased,” Governor Lesetja Kganyago said.
He added that while inflation has decreased, it is still well above pre-pandemic levels in many economies.
