South Africa’s vulnerability to US policy tightening is augmented by our dependence on external financing to deal with the current-account deficit. South Africa is, however, not alone in this episode of asset reallocation away from EMEs, whereby portfolio inflows in 2015 are expected to fall below 2008 levels, according to the Institute of International Finance8.
Some temporary factors are boosting inflation and offsetting the modest downward pressure that is being generated by excess supply in the economy. We project that these upward and downward pressures will dissipate over the projection horizon, leaving inflation close to target. Putting it all together, recent data have reinforced Governing Council’s view that the slowdown in late 2018 and early 2019 was temporary.