After a strong rebound in 2021, GDP is projected to grow by 1.8% and 1.3% in 2022 and 2023 respectively. Household consumption and investment will remain the main drivers of growth. Household income will benefit from the continuation of the COVID-relief grant. The commodity prices boom will support exports. Investment will continue to strengthen over the projection horizon. Inflation reached close to 6% in early 2022, and is projected to increase further due to higher energy prices before starting to fall.
The budget situation has improved, underpinned by the government revenue recovery and commodity price windfalls. Nonetheless, the government should maintain a solid consolidation policy to put debt on a more sustainable path and target spending increases on lifting potential growth and preserving social stability. In particular, spending on electricity generation, infrastructure and social grants remains essential. Further interest rate rises may be required to prevent inflation drifting away from the target band.