Headline inflation is projected at 4.8% in 2022 and 4.4% in 2023, National Treasury said on Wednesday.
This is attributed to food and energy prices, especially municipal rates from rising electricity prices, high domestic food inflation and elevated fuel prices, which are expected to be the key sources of inflationary pressure in 2022.
“Fuel prices were up 40.4% in the year to December 2021 owing to higher global crude oil prices.
“Fuel prices are expected to ease during 2022, but [they] remain elevated and above the 2019 average price level.
“Global supply-demand imbalances triggered an acceleration in the price of raw materials and intermediate inputs, which will continue to put upward pressure on consumer inflation.
“Medium‐term risks to the inflation outlook are to the upside, primarily as a result of price pressures from food and non‐alcoholic beverages, along with petrol, energy and other administered prices.
“Although the forecast assumes 2022 and 2023 electricity prices rise in line with Eskom’s application for a tariff increase in 2022/23, there is a risk that electricity inflation may exceed the assumption due to increasing costs of ensuring electricity supply,” said Treasury in the Budget Review document.
Household consumption expected to grow by 2.5% in 2022
Treasury said, meanwhile, that household spending is estimated to have grown by 5.6% in 2021, following a contraction of 6.5% in 2020.
Spending levels were recovering until July 2021, but fell in response to the public violence, and remain below pre‐pandemic levels.
Consumer confidence declined, and retail operations and supply chains were severely affected, Treasury said.
“Household consumption is expected to grow by 2.5% in 2022.
“Over the next three years, it is supported by sustained growth in private‐sector wages, growth in household credit extension and relatively low borrowing costs.
“Consumption is supported in the near term by the extension of the special COVID‐19 social relief of distress grant in 2022/23, and a relatively mild fourth wave of infections, followed by further easing of COVID‐19 restrictions at the end of 2021.”
Treasury said, however, that a weak employment outlook and higher inflation are likely to limit the pace of recovery in 2022.
“Sustained GDP growth and job creation are needed for higher consumption.” – SAnews.gov.za
