Salary increases are inexorably linked to inflation; where inflation is one of the most important determinants when deciding on the amount of the salary increase. The current difficulty with attempting to forecast future inflation, is that one now needs to evaluate and incorporate the impact of the Corona virus on the economy in general, and inflation in particular.
Further, there can be little doubt that the virus and the consequential forced lockdown, will have a devastating effect on the economy – whether a business can afford to grant any salary increase this year becomes a pertinent question.
We have often stated that salary increases should be formulated by using a robust, informed and scientific methodology, which is easily defendable and can concomitantly be employed during the budgeting process.
In our original article https://www.axiomatic.co.za/projected-2020-south-african-salary-increases-january-2020-update) we forecast average inflation for 2020 of 4.7%. Recent events have necessitated a revision and our forecast has been significantly reduced to 4.1% for 2020. This prediction is higher than the South African Reserve Bank’s 3.8% forecast but aligned with the Reuters Econometer survey (4.2%) and the Bureau for Economic Research (4.4%)
We have changed our original inflation forecast for 2020 to 4.1%.