South African Finance Minister Enoch Godongwana delivers the Medium-Term Budget Policy Statement in Parliament in Cape Town, South Africa, Nov. 12, 2025. South African Finance Minister Enoch Godongwana has announced a new inflation target of 3 percent, with a 1-percentage-point tolerance band. Delivering the Medium-Term Budget Policy Statement in Parliament on Wednesday, Godongwana said the tolerance band provides flexibility to accommodate any unexpected inflationary shocks. (Photo by Xabiso Mkhabela/Xinhua)

CAPE TOWN, Nov. 12 (Xinhua) -- South African Finance Minister Enoch Godongwana has announced a new inflation target of 3 percent, with a 1-percentage-point tolerance band.

Delivering the Medium-Term Budget Policy Statement in Parliament on Wednesday, Godongwana said the tolerance band provides flexibility to accommodate any unexpected inflationary shocks.

"This decision follows agreement between the Governor of the South African Reserve Bank and my consultations with the President and Cabinet. This new target immediately replaces the previous target range of between 3 percent and 6 percent and will be implemented over the next two years," the minister said.

Godongwana said the short-term fiscal costs of a lower target -- which include lower nominal gross domestic product (GDP) and revenue growth -- will make achieving fiscal targets more challenging.

"Yet the long-term benefits of taking this step far outweigh these costs. We remain committed to ensuring that our macroeconomic policies serve the best interests of all South Africans," he said.

Godongwana said the South African government is also on track to stabilize debt. "Government debt will stabilize in 2025/26, at 77.9 percent of GDP. This is the first time since the 2008 financial crisis that public debt will not grow as a percentage of GDP," he said.

Meanwhile, the minister noted that South Africa's economic prospects are also shaped by global developments, with the delayed effects of the unilateral tariffs imposed by the United States, coupled with rising protectionism, posing future risks to global productivity and price stability.

"Domestically, we forecast real GDP growth of 1.2 percent for 2025, more than double the economic growth in 2024," said Godongwana, adding that the real GDP growth is expected to average 1.8 percent between 2026 and 2028.

According to Godongwana, the structural reforms that South Africa has embarked on, particularly in energy and logistics, will be key to lifting its rate of growth closer to levels demanded by developmental needs.

He added that the country's strategy for faster growth and healthier finances continues to be anchored on four pillars, including maintaining macroeconomic stability, implementing structural reforms, building state capability, and supporting growth-enhancing infrastructure. ■

South African Finance Minister Enoch Godongwana (at the podium) delivers the Medium-Term Budget Policy Statement in Parliament in Cape Town, South Africa, Nov. 12, 2025. South African Finance Minister Enoch Godongwana has announced a new inflation target of 3 percent, with a 1-percentage-point tolerance band. Delivering the Medium-Term Budget Policy Statement in Parliament on Wednesday, Godongwana said the tolerance band provides flexibility to accommodate any unexpected inflationary shocks. (Photo by Xabiso Mkhabela/Xinhua)