South Africa faces upside risks to its inflation outlook, according to Central Bank Governor Lesetja Kganyago. The latest data shows headline inflation fell to 5.3% year-on-year, down from 5.6% in February and slightly below analyst expectations. The South African Reserve Bank (SARB) predicted headline inflation to reach 4.5% at the end of 2025, later than previously forecasted. Kganyago cited higher oil prices due to Middle East tensions and tight global financial conditions as potential risks.
This could lead to capital squeezing out of emerging markets and into advanced economies, potentially leading to a realignment of exchange rates. South Africa's rand has weakened by over 4% against the dollar since the start of the year. Price pressures from food items have been a concern across Africa, with droughts and adverse weather causing problems. However, Kganyago said the latest inflation data did not show signs of these pressures in South Africa. The country is also grappling with an ailing economy and high debt ahead of a general election on May 29 that could see the governing African National Congress party lose its parliamentary majority for the first time since the end of apartheid 30 years ago.
