Johannesburg - An oil price of $50 a barrel may boost South African consumer income by R21bn this year, helping to offset slower growth in manufacturing, Barclays estimates.
Lower oil prices will probably help to cut the inflation rate to 3.2% in April or May and narrow the current- account gap to about 4% of gross domestic product, Peter Worthington, an economist at Barclays’s Johannesburg-based investment banking unit, said in a presentation today.
The price of Brent crude has slumped by more than half in the past six months to trade as low as $47 a barrel today. Gasoline prices in South Africa have plunged about 20% since June, benefiting consumers, who make up about two-thirds of spending in the economy.
“Lower oil prices are a big boost to household disposable income in 2015 and this will help to shore up household spending,” Worthington said in a report.
Inflation eased to 5.8% in November, staying within the central bank’s 3% to 6% target band. The current-account deficit reached 6% in the third quarter.
Barclays cut its forecast for economic growth this year to 2.1% from 2.4%. That’s mainly due to weaker manufacturing output as power shortages persist and global demand remains uncertain, Worthington said.
Slower inflation may give the Reserve Bank room to keep its benchmark interest rate unchanged at 5.75% until at least September, and possibly for the rest of the year, he said. Policy makers last raised the rate in July.
Growth in personal income taxes suggest that employment in the economy may be growing at a faster pace than captured by official data, he said.
“We may have a stronger consumer than we tend to think,” he said. - Bloomberg