Kganyago Says Rand Weakness Is Expected To Continue, Inflation Outlook Revised Higher

The South African rand has taken a hit as a press conference with SARB Governor Lesetja Kganyago started, with the central bank noting that it expects further currency weakness. The Governor added that FX markets are expected to remain volatile and vulnerable to idiosyncratic shocks.

• The SARB raised its 2023 GDP growth estimate to +0.3% Y/Y from +0.2%, while maintaining the outlook for 2024 and 2025 at +1.0% and +1.1% respectively. The Governor commented that load-shedding is expected to deduct 2pp from growth this year, while an improvement in electricity supply would help raise the GDP outlook.
• The SARB revised its headline CPI inflation forecasts higher. It expects inflation to be +6.2% Y/Y this year (prev. +6.0%), +5.1% in 2024 (prev. +4.9%) and +4.5% in 2025 (prev. +4.5%). Core CPI estimates were also revised higher across the forecast horizon. The Governor warned that the risks to the inflation outlook are tilted to the upside.