Treasury projects inflation to reach 4.5%

Johannesburg – Inflation is expected to rise to 4.5 % in 2021 due to pressures from food and energy prices, the National Treasury said on Thursday.

Tabling the Medium-Term Budget Policy Statement (MTBPS) in the National Assembly on Thursday, the department said, however, that inflation is expected to remain contained over a three-year period.


Inflation refers to an increase in the general level of prices.

“Inflation is projected to reach 4.5 % in 2021, reflecting upward pressure from non-core inflation – specifically food and energy prices – while core inflation remains subdued.

“Beyond 2021, inflation is expected to remain well contained within the target range, approaching 4.5 % in the outer years.

Risks to the inflation outlook are primarily in the near term and assessed to the upside, mainly stemming from non-core inflation.”

Following a Coronavirus-induced decline in 2020, the National Treasury said household consumption is expected to grow by 5.7 % in 2021.

“It is supported by improved earnings and growing credit extension, which is linked to low interest rates.

Nonetheless, the value of household consumption remains 1.4 % below pre-pandemic levels, weighed down by lower spending on semi durable goods such as clothing.”

National Treasury said the COVID-19 lockdowns disproportionately affected lower-income households.

“While 94 % of workers with graduate qualifications reported receiving their full salaries in the second quarter of 2021, only 86 % of workers with matric or less reported receiving the same.

“More than three-quarters of post-pandemic job losses have been in lower-earning positions.

“Furthermore, fewer than 8 % of employees in these positions were able to work from home during lockdown periods.”

National Treasury said the easing of lockdown restrictions and the reinstatement of the special COVID-19 social relief of distress grant until March 2022 will support spending for lower-income households in particular through the rest of 2021.

“Over the next three years, persistently high unemployment will continue to weigh on the recovery.

Renewed restrictions in response to additional waves of COVID-19 infections would pose a significant downside risk to household incomes and spending.”

– SAnews.gov.za

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