'SA inflation battle not over'

Johannesburg - Economists participating in Sake24's Economist of the Year competition in their last consensus forecast for 2008 adopted a positive view on falling inflation. But inflation may not fall as quickly as is generally thought.

A relatively weaker rand and an oil price that could turn up from its current low levels are two factors that could constrain a rapid fall in inflation.

The 35 economists' forecast for December was a CPIX of 11.21%. The previous month's was 11.29%. This was more optimistic than November's actual 12.1%.

The economists expect that the CPIX will decline further to 6.7% next year, which is also higher than the Reserve Bank's view that CPIX will fall to under the 6% target in the third quarter of next year, as well as higher than the Reserve Bank's adjusted average of 6.2% for 2009. The forecast of 6.7% for 2009 is, however, better than the 7.26% average for November.

It's good news that the economists refute talks of a recession with their views on economic growth, which officially declined to 0.2% in the third quarter.

An average of 3.24% is expected for this year, somewhat lower than the 3.38% they had predicted in November. Growth of 2.11% is being forecast for 2009, while at the beginning of the year they considered growth would reach 4.11%.

The economists' views are fairly divergent.

An optimistic economist like Dr Iraj Abedian of Pan African Investments predicts GDP growth of 3.9% both this year and in 2009, and a narrowing of the current account deficit to R98bn.

In contrast, Pieter Laubscher from the Bureau for Economic Research reckons that the deficit will increase to R189.25bn with GDP growth only 3.3% this year and 1.5% in 2009.

The average forecast for the December deficit amounts to R166.84bn, much where it is at the moment.

Somewhat more disconcerting is the fact that two previous winners - Dave Mohr and Mike Schüssler - predict that the economy will contract by 0.5% next year. This is in conflict with the consensus growth forecast of 2.11%. The economists' average forecast for Brent crude oil in December was $61.25 a barrel. On Friday it was trading considerably lower at $39.57.

The economists are optimistic about the rand, and predict that the currency will end the year at R9.65/dollar. This is, however, still weaker than January's expectation that the currency would end the year at R7.72.

Last month the rand was still trading at R10.30/dollar, but it began to strengthen this week in reaction to the weaker dollar which fell sharply against the euro and the yen.

- For more business news in Afrikaans, visit sake24.com.