economic outlook projects global inflation at 7. 0 % this year, down from the 2022 average of 8. 7 %. inflation is expected to further moderate to 4. 9 % in 2024. this decelerating trend is reflective of lower food and commodity prices, particularly oil, coupled with the gradual unwinding of supply constraints. although demand pressures have begun easing somewhat in response to global monetary and fiscal policy normalisation, core inflation remains high and persistent, risking prolonged target breaches in most economies, which could lead to some de - anchoring of inflation expectations. furthermore, the global growth outlook remains weak. following the steady recovery in trading - partner growth in 2021 of 7. 0 %, growth slowed to an estimated 3. 5 % last year. looking ahead, and in line with higher prevailing interest rates, the sarb expects trading - partner growth to average 2. 0 % this year, before rising gradually to 2. 6 % in 2024 and 3. 1 % in 2025. 2 in addition to slow global growth, rising interest rates have also triggered banking sector stresses in the united states ( us ) and europe – leading to tighter global credit conditions as markets and financial institutions readjust their portfolios. consequently, uncertainty around the path for the us federal reserve ’ s ( fed ) federal funds rate has increased over the near term. this has added to financial market volatility and the resulting ‘ risk - off sentiment ’ is impacting small open economies such as south africa. these bank stresses have also added to global policy uncertainty as the size and duration of these effects are still playing out, as can be seen in the recent failure of first republic bank at the beginning of may 2023. the domestic inflation landscape when i mentioned earlier some of the positive global developments over recent months, one of them has been a reduction in delivery lags and supply bottlenecks, which has contributed favourably to the inflation dynamics of some countries. unfortunately, this has yet to have a material impact on our domestic inflation, mainly due to idiosyncratic domestic factors. in fact, it is expected that our own domestic infrastructural bottlenecks will continue to exert upside pressure on the inflation outlook. in addition to the initial studies on the impact of load - shedding on growth, there is recognition and growing evidence that the country ’ s ongoing energy supply challenges are impacting on prices as well. the sarb now estimates that loadshedding will add 0

the rand has depreciated around 6. 8 % in the year to date and by 17. 6 % over the past year against the us dollar. the rand depreciation has negated the impact of lower global energy and food costs on domestic inflation. of concern is that core inflation, which excludes the more volatile food and energy components from the consumer price index ( cpi ) basket, remains sticky. the pressure on core inflation has been mainly driven by repriced imported goods costs. but apart from higher imported goods costs, one needs to keep an eye on core services inflation. to date, services inflation has remained relatively subdued ‒ averaging around 3. 9 % in 2022. however, upside risks seem clear, especially in medical insurance as premiums move closer towards their longer - term average rates. in addition to this, the tightening rental housing market and high inflation expectations are expected to exert upside pressure on core inflation over the near term. risks to services inflation also emanate from spillover effects from higher food and fuel inflation as well as possible higher wage increases given the adaptive nature of wage settlements in our economy. ( we have already seen sharply higher wage settlements in the public sector. ) we predict that core inflation will only decline to the target midpoint in the second quarter of 2025. inflation has important distributional consequences, with the poor and those living on fixed incomes the most adversely impacted. the current inflation surge has been underpinned by high food and fuel price increases that more adversely affect the consumption baskets of poorer households. statistics south africa ( stats sa ) data show inflation for the lowest expenditure deciles ( deciles 1 and 2 ) at about 11 % in march 2023, while that for expenditure deciles 9 and 10 is around 6. 5 %. unlike high - income south africans, low - income earners and the poor more generally cannot protect their incomes from erosion due to inflation, and this results in rising income inequality in our country. this is a critical reason for the sarb ’ s constitutional mandate to protect the purchasing power of the rand, as this mandate ensures that we can continue to work towards improving and advancing the economic well - being of all south africans. looking ahead, domestic headline inflation is projected to remain elevated, returning to the target range in the third quarter of this year and averaging 6. 0 % for the year. a more pronounced moderation in inflationary pressures is only expected in the latter years of