South Africa: Moving on up

KEY TAKE-OUTS:

South Africa’s Q1 GDP report highlights the economy is not only benefitting from strong commodity prices, but also some pent up consumer demand, we think.

We have revised up our GDP growth forecasts by a further 0.5pp to 4.7% in 2021 and 0.2pp to 2.1% in 2022, on a slightly improved consumption outlook and slower depletion of inventories.

Record terms of trade continue to benefit the balance of payments position. Therefore, we have revised up our 2021 current account surplus by 0.7pp to 2.3% of GDP.

A slightly faster closing of the output gap and broader GDP inflation gains have prompted us to further tweak up our CPI forecasts by 0.2pp for 2021 and 2022 and supports our call for a rate hike by November this year. We now see an end-2022 policy rate of 4.50%.

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