Momentum Investments cautions that South Africans should not expect interest rates to return to pre-pandemic levels in the near future. The South African Reserve Bank (SARB) has indicated that global interest rates are likely to end 2025 higher than they were before the pandemic, due to cautious central banks and a higher global r-star (the long-run real neutral interest rate). The SARB had raised the repo rate to 8.25% in 2023, a 15-year high, but has since cut it to 8.0%. Economists expect further cuts in late 2024 and into 2025.

Globally, inflation has eased, and a monetary policy easing cycle has begun, but risks such as rising geopolitical tensions and sticky core inflation persist. While South Africa’s inflation rate dropped from 5.2% in April to 4.4% in August, aided by lower oil prices and a stronger rand, the SARB warns that global interest rates will remain elevated.

Domestically, South Africa’s economic growth remains sluggish, with growth forecasted at 1.1% in 2024 and rising to 1.8% in 2025, driven by higher disposable income and fixed investment. However, global growth, expected at 2.7% in 2024, is unlikely to boost domestic demand.

The report underscores that economic shocks such as load shedding and the pandemic have hampered growth, and achieving pre-shock growth levels would require an annual growth rate of 3.2%, far higher than current projections of 1.4% by 2026.