The economists participating in the 2022 BMR/Unisa Economist of the Year Competition have been submitting monthly economic forecasts for 2022. It appears from the forecasts that 2022 started off with a fairly gloomy outlook, and the outlook became progressively gloomier as the year progressed. This is a clear indication of the impact of negative factors on the participants’ views as 2022 advanced.

The first indication of a progressively negative outlook was the participants’ forecasts with respect to economic growth. The participating economists’ median forecast for real economic growth for 2022 was 2% in February 2022, already an indication of dampened expectations for the year. Given that South Africa requires a sustained economic growth rate of about 5% per annum according to the National Development Plan (NDP) to start addressing the ‘Triple challenge’ of poverty, inequality, and unemployment, a 2% real economic growth rate is not optimal to overcome such challenges. The latest median forecast of participating economists shows an expected 1.8% real economic growth rate for this year.

Given the fact that the economic growth forecast was low and declining during the year, the same could be expected with household expenditure growth.  Household expenditure is responsible for about two-thirds of the GDP in South Africa. The participating economists’ median forecast with respect to real household expenditure growth was a fairly low 2.2% in February 2022, which declined to 2.1% as the year progressed. Many factors could have influenced the view of the participants, including lower-than-expected job creation, higher-than-expected unemployment, and inflation increased levels of consumer financial vulnerability and various other downside risks to GDP growth in South Africa.

South African consumers were hard hit by rapidly increasing inflation rates during 2022. The median consumer price inflation forecasts of the participating economists increased from 5.1% during February 2022 to 6.8% in October 2022. Such rapidly increasing inflation also had an impact on the participating economists’ forecasts with respect to interest rates in South Africa. The South African Reserve Bank hiked the repurchase rate several times during 2022 in order to address increasing inflation rates. Whereas the participating economists’ median forecast for the prime interest rate was 8.25% during February 2022, it increased to 10.0% during October 2022.

The monetary tightening also had an impact on South African long-term bond yield forecasts by participating economists. They started February 2022 with a median forecast of 9.7%, which increased to 10.5% in October 2022. The outlook for the long-term bond yield rate may increase even further during November should the Reserve Bank hike the repurchase rate at the upcoming Monetary Policy Committee meeting to address inflation concerns.

The participating economists’ expectations for the Rand/Dollar exchange rate for the 4^th Quarter of 2022 also show evidence of the impact of domestic, regional and global economic vulnerabilities as the year progressed. In February 2022 the median forecast for the Rand/Dollar exchange rate was R15.67 per US Dollar, which has been adjusted  upwards to R17.50 in October 2022. A weaker exchange rate increases the price of imports. Not only did the rapidly weakening Rand-Dollar exchange rate have an adverse impact on fuel prices, but also negatively impacted general inflation rates in South Africa. The participants’ expectations for the 4^th Quarter US Dollar price of Brent Crude Oil also increased from the outlook in February 2022. Whereas the participating economists expected a Brent Crude Oil Price of $78 per barrel in February 2022, their median estimate was $95 per barrel by October 2022.

Given the increasingly gloomier forecasts by the 33 economists participating in the 2022 BMR/Unisa Economist of the year competition, the question can now be asked what can be expected for 2023.  Likely the outlook will remain unfavourable given the current domestic and global economic headwinds.

For more information please contact Prof Carel van Aardt (carel.vanaardt@bmr.co.za), Ms Jacolize Meiring (jacolize.meiring@bmr.co.za or Prof Deon Tustin (deon.tustin@bmr.co.za).

For more information regarding the BMR/Unisa Economist of the Year competition please contact Ms Madeleine Goetz (madeleine.goetz@bmr.co.za) or Ms Pamela De Jongh (tdejonp@unisa.ac.za).