Country Report South Africa January 2011

Outlook for 2011-15: Inflation

Inflation, measured by the new CPI benchmark, edged up for the second month running in November to 3.8% year on year, driven by costlier fuel and power, but it remains firmly within the SARB's 3-6% target range. Sound policies, a strong rand, modest consumer demand and spare industrial capacity will help to keep inflation in check. However, hefty wage increases and the sharp, 25% annual rises in electricity tariffs in 2010-12 will stoke inflation across the price spectrum. Trends in global food and fuel prices pose additional risks. Inflation is now estimated to have subsided to an average of 4.4% in 2010 before edging higher, to 4.5% in 2011 and 5.3% in 2012. However, inflation will stay within the SARB's target range throughout the period (barring shocks) and will dip back below 5% in 2013-15, helped by more stable commodity prices, slower growth in the domestic economy, stricter competition policy and efficiency gains arising from investment in infrastructure.

© 2011 The Economist lntelligence Unit Ltd. All rights reserved
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