After a contraction in South Africa’s real gross domestic product in the fourth quarter of 2016 and the first quarter of this year, economic growth rebounded to 2,5% at a seasonally adjusted annualised rate in the second quarter of the year.
The second-quarter growth was to a large extent influenced by strong growth of 33,6% quarter-on-quarter (q/q) in agricultural production. Excluding the agricultural sector, the economy showed growth of 1,6% in the second quarter compared with the preceding quarter.
The forecast is for the economy to grow by a real 0,6% in 2017, with growth expected to rise to 1,1% in 2018.
Headline consumer price inflation has slowed down from 6,6% year-on-year (y/y) in January this year to 4,8% y/y in August, to a large extent as a result of a sharp downward trend in food price inflation over this period.
These developments contributed to an average headline inflation rate of 5,5% y/y in the first eight months of the year.
The forecast is for inflation to average between 5% and 5,5% in 2017 and 2018. The major risks to the inflation outlook remain the rand exchange rate as well as fuel and electricity price trends.