Global Economic
By Thabo Mosia
South African Reserve Bank (SARB) Governor Lesetja Kganyago has cautioned that the world economy is navigating “extreme levels of uncertainty,” prompting the Monetary Policy Committee (MPC) to hold the repurchase rate steady at “7.50%” on 20 March 2025. In a detailed “Statement of the Monetary Policy Committee,” Kganyago highlighted escalating trade tensions, shifting geopolitical dynamics, and domestic challenges as key factors influencing this decision, while underscoring the need for cautious economic stewardship in an unpredictable global landscape.
Global and Local Economic Context
Kganyago painted a sobering picture of the global economy, noting that “trade tensions have escalated, and longstanding geopolitical relationships are shifting abruptly.” He pointed to specific developments, such as Germany’s planned investments in security and infrastructure, expected to bolster European growth, and China’s new stimulus measures aimed at stimulating demand. Meanwhile, in the United States, economic volatility has taken centre stage, with initial stock market surges giving way to weakened growth expectations, a softer dollar, and heightened policy uncertainty driven by tariff threats.
Closer to home, South Africa’s economic performance remains uneven. Growth in the fourth quarter of 2024 reached “0.6%”, driven by household spending bolstered by lower inflation and withdrawals from the “Two-Pot pension system.” However, Kganyago noted that this uptick masked broader weaknesses, with other sectors faltering. As a result, the SARB has revised its 2025 growth forecast downward from “1.8%” to “1.7%”, citing “subdued demand” and “lingering supply-side fragilities.” The Governor warned that “risks to growth are to the downside,” signaling potential challenges ahead.
Inflation Outlook and Policy Stance
Despite global inflationary pressures—where advanced economies like the US, Euro area, UK, and Japan report rates above “2%”—South Africa’s inflation remains contained at “3.2%”, within the lower half of the SARB’s “3-6%” target range. Kganyago attributed this to low goods inflation and a more benign trajectory for administered prices, including a lower electricity tariff increase announced by NERSA in February. However, proposed Value Added Tax (VAT) hikes, outlined in the 2025 Budget, are expected to add “0.2 percentage points” to headline inflation.
The SARB now projects headline inflation at “3.6%” for 2025 and “4.5%” for 2026, slightly lower than previous forecasts, thanks to improved fuel price projections. “For now, inflation appears contained,” Kganyago said, though he cautioned that risks remain balanced in the short term and skewed to the upside over the medium term.
Against this backdrop, the MPC opted to maintain the repo rate at “7.50%”, with four members supporting the decision and two advocating for a “25 basis points” cut. “The global economy is not on a stable footing, and there are also domestic uncertainties,” Kganyago explained, justifying the cautious approach. The SARB’s Quarterly Projection Model suggests rates may stabilise at a neutral “7.25%” in the future, though decisions will remain data-driven and responsive to evolving risks.
Exploring Economic Scenarios
The MPC’s deliberations included scenario planning to address global uncertainties. In one scenario, a US slowdown with higher commodity prices—particularly gold—could benefit South Africa through improved terms of trade and a stronger rand, potentially lowering inflation and policy rates. Conversely, Kganyago raised concerns about South Africa’s trade ties with the US, particularly the African Growth and Opportunity Act (AGOA). “If South Africa were to lose AGOA benefits, we see some weakening of exports and slightly lower growth,” he said. A worst-case scenario involving tariffs and a sentiment shock could slash growth by “0.7 percentage points,” with a weaker rand driving up inflation and necessitating tighter policy.
Recent posts on X align with Kganyago’s warnings, with users noting the potential loss of AGOA as a threat to exports and the rand’s stability, reinforcing the SARB’s concerns about external vulnerabilities.
Domestic Reforms and Stability
Kganyago stressed that sustaining economic reforms is critical in this volatile environment. “In a difficult global environment, it is vital to sustain domestic reforms that boost growth, while preserving macroeconomic stability,” he said. He outlined priorities such as achieving prudent public debt levels, repairing network industries, lowering administered price inflation, and aligning real wage growth with productivity.
The SARB’s commitment, he added, is to deliver “low and stable inflation” with well-anchored expectations. The MPC remains vigilant, prepared to adjust policy if conditions shift. For the first half of 2025, GDP projections stand at “0.4%” for Q1 and “0.5%” for Q2, reflecting cautious optimism tempered by structural challenges.
🔴 Central News Weekly Edition | Issue 98 🔴 Download the Latest Print and E-Edition | Headline: “Fezile Dabi Mayor Khasudi: ‘The Boreholes Exist, and the DA is Delivering for Residents”
Download Here:
Direct PDF Link:
https://centralnews.co.za/wp-content/uploads/2025/03/Central-News-Issue-098.pdf
Read all our publications on magzter:
https://www.magzter.com/ZA/Central-News-Pty-Ltd/Central-News/Newspaper/All-Issues
Central News also offers Sponsored Editorial Content, Podcasts , Radio / Social Media Simulcast, Video Production , Live Streaming Services, Press Conferences, and Paid Interviews (Video/Audio) etc.
We guarantee exceptional exposure, reach, and engagement, with an excellent return on investment.
Advertisement:
To place your advert on our platforms (Print Newspaper or Digital Platforms) : Please email : sales@centralnews.co.za
For Business Related:
business@centralnews.co.za
Newsroom:
Send your Stories / Media Statements To: newsroom@centralnews.co.za
General Info:
info@centralnews.co.za
Office Administrator:
admin@centralnews.co.za
Whatsapp / Call: 081 495 5487
Website: https://www.centralnews.co.za
Social Media Platforms (@centralnewsza) : Linkedin, Facebook, Tiktok, Twitter, Instagram, Youtube