The model will factor in changes in international sentiment towards the country and its risk premium, consider public and private wages separately, change the way the inflation estimate is reached and include spikes in fuel and electricity prices.
The South African Reserve Bank will for the first time modify the model that partly influences its interest rate decisions, it said on its website on Tuesday.
In the last decade South Africa's economy has changed drastically with analysts and economists claiming that the country has deindustrialised heavily. “In its current form, the QPM has no mechanism to account for fiscal policy in a systematic manner, limiting its ability to help explain how fiscal dynamics affect on inflation, growth and monetary policy,” the South African Reserve Bank said.
South Africa's ratio of public debt to GDP almost tripled from 23% in 2008 to nearly 70% in early 2022 amid persistently large fiscal deficits, the bank said, adding that the country's risk premium has also doubled.
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