In light of recent downbeat global economic developments and BER survey data suggesting that domestic growth remained lacklustre in the second quarter, the BER has downwardly revised the GDP growth forecast by 0.4% pts (to 2.5%) for 2012 and 0.3% pts (to 3.3%) in 2013. The lower oil price and positive food price developments mean that consumer inflation is now forecast to average 5.7% during 2012 versus 6.2% previously projected. At an expected average of 5.3%, price pressures are also set to be more contained in 2013. The combination of softer growth and better inflation prospects suggest that the SA Reserve Bank could reduce the repo rate by another 50bps, probably already at the July MPC meeting.

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