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Global Economic Outlook – September 2022 GDP is set to grow by around 1.8% in 2022, led by Little tangible policy action has been taken to increase the contributions from the finance, real estate and business lower investment and consumption spending caused by services sector, growth in personal services as well as a reaction to a number of governance failures, including mining, agriculture and trade, catering and accommodation. ongoing policy uncertainty, corruption, aging infrastructure The projected growth in 2022 is noticeably lower than that and continued power shortages, the absence of growth- achieved in 2021. It should however be understood that stimulating policy interventions and inadequate levels of much of that growth was due to technical base effects service delivery. More will need to be done to lift the South following the sharp Covid-induced contraction experienced African growth trajectory above its current long-term level. in 2020. The predicted rate of economic growth would not be Growth in 2023 is expected to decline further to 1.5%, sufficient to reduce the high unemployment rate, forecast with higher interest rates and lower global growth reducing at 34.3% for 2022. South Africa is set to remain in a aggregate demand locally. In 2024, economic growth paradoxical state of a growth recession, where slow growth should return to the average pre-Covid level of around is accompanied by rising unemployment unless some of the 1.7% as inflationary pressures abate and global growth barriers to growth listed above are explicitly addressed. rates improve. Global inflationary pressure continues to weigh on the economy and remains largely cost-push in nature as Chart 50: South Africa’s current account balance (Rbn) aggregate demand still lags below its potential level. The main drivers of forecast consumer inflation remain energy 400 prices, including both fuel and electricity prices, as well 300 as food prices caused by ongoing supply chain disruptions following the pandemic and exacerbated by the conflict 200 in Ukraine. 100 Although the global increase in commodity prices 0 has slowed somewhat on the back of lower growth rent account balance (Rbn) expectations, South Africa still faces elevated fuel and food Cur-100 production costs. Energy supply, and in particular electricity, -200 remain an ongoing concern for South Africa whose energy regulator awarded the state-owned utility an above inflation -300 9.6% increase in energy prices from 1 April 2022. 2005 2007 2009 2011 2013 2015 2017 2019 2021 2023 Source: Statistics South Africa, South African Reserve Bank, KPMG analysis. The strength of the U.S. dollar, combined with lower global growth expectations, have eroded the positive balance on South Africa’s current account resulting from elevated Chart 51: South Africa’s consumer price commodity prices and led to an acceleration in inflation. inflation (headline indexed 2020 - 2022) Headline consumer inflation rate is expected to reach well above the upper boundary of the central bank’s inflation 110 targeting range of 3% to 6%, at around 7.3% in 2022, 108 before moving back towards the upper bound of 6% in 2023 and further to the midpoint of the targeting range in 2024. 106 0 0 104 anuary = 1 Frank Blackmore 102 Lead Economist, KPMG in South Africa Index, J 100 98 96 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2020 2021 2022 Source: Statistics South Africa, KPMG analysis. © 2022 Copyright owned by one or more of the KPMG International entities. KPMG International entities provide no services to clients. All rights reserved. 52

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