South Africa faces a myriad of factors affecting the pace of policy normalization which includes inflation, unreliable electricity supply and the Russia-Ukraine war, said Oxford Economics Africa on Monday.
The South Africa-based Oxford Economics Africa released a research briefing about factors affecting the pace of policy normalization, citing load-shedding and recent floods in KwaZulu-Natal Province will hurt the real gross domestic product growth in the second quarter of 2022.
The Oxford Economics Africa said there is a rise in inflationary pressures with input costs at a rapid pace. It is expected the South African Reserve Bank (SARB) which will release the decision of the Monetary Policy Committee on Thursday increase the repo rate by 50 basis points.
The institution expected the repo rate to return to pre-pandemic levels by 2025/2026.
As for external influences, the Oxford Economics Africa said the Russia-Ukraine war has resulted in a rise in global prices which has affected South Africa.
The Rand Merchant Bank economist Siobhan Redford said the monetary policy faces a fine balancing act between inflation and growth. She agreed with Oxford Economics Africa on the challenges facing the country.
“It is clear that we face continued mixed and uncertain economic conditions, as prices are elevated, largely as supply shocks remain dominant,” said Redford.
She also expected the SARB to hike the repo rate by 50 basis points, the first hike of this quantum since 2016. Enditem