The supportive global conditions that spurred the economic recovery in 2021 are dissipating, and domestic shocks – particularly power cuts – have lowered economic growth and confidence. A broad slowdown in global growth and high inflation are forecast. Rapid and decisive implementation of structural reforms, especially in the energy sector, supported by a clear and stable macroeconomic framework and improved state capability, remain crucial to improve the economy’s productive capacity and international competitiveness.

Key Issues:

• Since the 2022 Budget Review, global and domestic risks to the economic outlook have materialised, including slower global growth, higher levels of inflation, accelerating interest rate increases and intensified power supply interruptions.
• Real GDP is projected to grow by 1.9 percent in 2022, compared with 2.1 percent estimated in the 2022 Budget, and average 1.6 percent from 2023 to 2025.
• Investment and employment levels remain lower than before the COVID-19 pandemic and lag behind the recovery in real GDP. Households are under increasing pressure from higher inflation and interest rates.
• A sustained improvement in growth and employment outcomes requires rapid and decisive implementation of economic reforms, supported by South Africa’s clear and stable macroeconomic framework – and improved state capacity.

Contributions to quarterly headline inflation