BofA maintains South Africa GDP growth forecast, sees rate cut chance

Published 21/03/2025, 10:34
BofA maintains South Africa GDP growth forecast, sees rate cut chance

Investing.com -- Bank of America analysts maintain a positive outlook for South Africa’s economic growth, projecting an improving trend that could reach 1.6% this year. This follows a year where real GDP growth slightly underperformed at 0.6%, despite improvements in electricity supply and the formation of a new Government of National Unity in June 2024.

Looking ahead to 2025, BofA anticipates a better economic climate driven by increased domestic investment and consumption, although they caution that risks are skewed to the downside. They note that high-frequency data has yet to firmly indicate an upward trajectory and that industrial production is showing mixed trends, suggesting that more time is needed for growth to stabilize at higher levels.

On the inflation front, BofA observes that domestic inflation in South Africa remains benign, which keeps the door open for a potential rate cut by the South African Reserve Bank (SARB). The central bank held the policy rate steady at 7.5% on March 20, citing global risk concerns.

However, inflation is expected to stay below the 4.5% target at least until the third quarter of 2025, compared to previous expectations of reaching this level by mid-year. BofA forecasts headline CPI to average 3.9% in 2025 and 4.6% in 2026.

BofA also revised its forecast for Brent crude oil prices, lowering them to $70 per barrel from a previous estimate of $75 for 2025 and setting a price of $73 for 2026. Additionally, the National Energy Regulator of South Africa (Nersa) has announced a tariff increase of 12.7%, which is less than BofA’s earlier estimate of nearly 20%.

Regarding the South African rand (ZAR), BofA suggests that the currency is undervalued and could appreciate if the U.S. dollar weakens. They believe that once market uncertainties have dissipated, the SARB may still opt for a rate cut of 25 basis points, potentially bringing the policy rate down to a terminal rate of 7.25%.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers
© 2007-2025 - Fusion Media Limited. All Rights Reserved.