The Bank revised economic growth forecast sharply lower to 0.3% in 2023 due to the intensified and uncertain loadshedding outlook. The Bank estimates that electricity outages would shave about 2% to GDP growth in 2023, compared to a previous moderate estimate of 0.6%. Also, the Bank lowered the real GDP forecast to 0.7% in 2024 and 1.0% in 2025. The bank sees the risk to economic growth as balanced.

Regarding prices, the SARB kept its inflation forecast unchanged at 5.4% in 2023 while raising it slightly to 4.8% in 2024, and maintaining 4.5% in 2025. Core inflation was revised slightly lower to 5.2%, compared to the previous estimate of 5.5% in 2023 and 4.7% compared to the previous estimate of 4.8% in 2024. The SARB maintained core inflation at 4.5% in 2025.

Headline inflation is expected to return within the target band in 2Q2023 and be sustained around the midpoint in 4Q2024. The bank assessed the risk to the inflation outlook to be on the upside, owing to uncertainty regarding the impact of loadshedding on business costs, a potentially weak exchange rate, and volatile commodity prices.

Overall, the interest rate hiking cycle is probably peaking, given 375 cumulative rate hikes, which is moving into restrictive territory. However, this hinges on headline inflation returning sustainably within the target range of 3% to 6%. Furthermore, the United States interest rate cycle matters since South Africa is a small open economy prone to shocks.