More petrol price woes and repo rate hikes – Economists’ predictions for 2023

While the country welcomed the massive drop in fuel prices at the start of the year, the reprieve is predicted to be short-lived, as one economist, Dawie Roodt says that another petrol price hike might be imminent towards March this year.

According to the Department of Mineral Resources and Energy, the average Brent Crude oil price decrease is said to have been behind the fuel price cuts.

But Roodt told the Daily Investor that he believes that the price of fuel could go up again in March – despite the fact that oil prices are expected to continue to drop in response to fears of a global economic recession, as a result of the hike in fuel levies.

Investec economist, Tertia Jacobs, however, believes that South Africans will likely see the petrol price decrease again in February.

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“It is quite conceivable that we could see another petrol and diesel price cut in February – with likely a bigger petrol price cut than the diesel. But it all depends on the current oil price staying roughly on the same level and also the Rand being range bound.

“From there a lot is also going to depend on the global growth, as well as an increase in China oil demand which has been very depressed on the back of the lockdowns and we know that things have changed in the opening.

“So, there is upside risks to the fuel price in the second half of the year, but short term – it remains very constructive,” Jacobs told The Citizen.

Repo rate hike

The South African Reserve Bank’s Monetary Policy Committee will meet again later this month, to assess the current repo rate. Economists predict that the Reserve Bank will raise the rate by 50 basis points in this meeting.

Jacobs, however says that Investor economists predict that the hike might be lower than expected.

“Our CIB expects the Reserve Bank to increase the repo rate by 25 basis points. The repo rate at 7% is neutral so anything going above 7% is restrictive.

“We’re going for 25 and not 50 because we believe it could slow down the pace of rate hikes and that this Wednesday’s inflation print is going to be quite important.

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“The Rand is on the front foot, it is now trading around R17 to the Dollar, and that’s on the back on the China reopening expectation.

“The Reserve Bank’s inflation forecast is unlikely to be revised higher, so I do think they can also start slowing down. I think we are close to the peak in our interest rate cycle. Thereafter, rates can move sideways for a period of time,” Jacobs said.