Biggest change to inflation in South Africa in 25 years

South Africa’s Finance Minister Enoch Godongwana lowered the country’s inflation target to 3% on Wednesday, the first adjustment to the target in 25 years.

The new target will have a 1 percentage point tolerance band either side and comes after consultations with the president and cabinet, Godongwana said in a mid-year budget review in Africa’s biggest economy.

“This new target immediately replaces the previous target range of between 3% and 6% and will be implemented over the next two years,” Godongwana said in a speech to lawmakers.

South Africa’s central bank Governor Lesetja Kganyago has been pushing for a lower target and said in July that the bank would effectively target 3% inflation, rather than the target range in force since 2000.

The budget review also showed the National Treasury now forecast a slightly smaller consolidated budget deficit this year of 4.7% of gross domestic product (GDP), compared to May’s forecast of 4.8% of GDP.

South Africa’s debt to GDP ratio is seen stabilising at 77.9% this fiscal year, higher than the 77.4% estimated in May.

The Treasury’s economic growth estimates for this year and next have been revised down to 1.2% and 1.5%, from 1.4% and 1.6% respectively.