The speed of further improvement in the labor market following the initial rush of reopening is less clear, however. Some employers may be cautious about significantly increasing payrolls before post-COVID consumption patterns are more firmly established. Others may be implementing measures to stay lean and contain costs.
If we are to maintain moderate levels of inflation in South Africa, we will need a macro strategy that delivers fiscal sustainability. There have been some signs of progress lately, but we are still running fiscal deficits near 6% of GDP, despite record commodity prices. We have seen before, and we know high commodity prices do not last forever.