South Africa’s economic outlook for 2025 is improving, with growth projected to approach 2%, compared to 1.1% in 2024. South African Reserve Bank Governor Lesetja Kganyago attributes this optimism to structural reforms and a coalition government that has accelerated progress in key sectors like electricity, freight rail, and visas. However, the inflation outlook remains uncertain due to factors such as global oil prices, food prices, exchange rate fluctuations, and potential U.S. protectionist policies under a Trump presidency. Inflation was at 2.9% in November 2024, below the SARB’s 3%-6% target range, but is expected to average 4.5% in 2025. The SARB has reduced interest rates in recent meetings, with further cuts anticipated

We have two data releases due for today, namely Retail Sales and CPI. South African headline inflation accelerated slightly to +2.9% y/y in November from +2.8% y/y in October due to rising fuel costs. Fuel was less deflationary in November at -13.6% y/y compared to -19.1% y/y in October. However, partially offsetting the rising fuel inflation, food inflation slowed further to its lowest reading since 2010 (1.6% y/y in November from 2.8% y/y in October). Ongoing slower food inflation is at least partially a passthrough effect of lower fuel prices. As such, rising fuel inflation should start to contribute to accelerating food inflation. Overall, the report confirmed that headline CPI likely bottomed out in October and will likely continue accelerating moving forward, driven by higher fuel inflation. December’s inflation is thus expected at 3.2% y/y. Accelerating inflation will keep the SARB cautious when considering future rate cuts.