Inflation could be as low as three percent by the end of the year, some economists are predicting.
From the current level of 7,3 percent, inflation could reach below three percent by the year end, says Erika van der Merwe, an economist in Old Mutual's economic unit.
And Absa's economists see inflation at below five percent in the second half of the year, which is good news for anyone hoping for further cuts in interest rates.
"Low inflation in trading partner countries and the relative stability in the rand exchange rate will most probably support a stable to lower inflation rate in the next six months," they say.
Absa expects the interest rate decline to continue into 2000, with the prime rate (the rate at which banks lend to their best customers) at 15,5 percent by the end of the year and reaching a low of 14 percent during 2000 before climbing again.
But, warns Van der Merwe, consumers should not be lulled by lower interest rates into raising debt levels.
Though she does not foresee a shock to the economy like last year's emerging markets crisis which sent interest rates spiralling, Van der Merwe says South Africa, with its small open economy, is vulnerable to potential global shocks and a repeat performance of last year's interest rate hike is not impossible.
Thanks to a weak economy, tougher domestic competition and low world inflation, inflation remains reasonably well under control.
Given a fairly firm rand and fast falling interest rates, inflation could drop sharply over the next few months, she says.
She expects prime of 16 percent by the middle of the third quarter of this year and 15 percent before the year end.
But the growth recovery and likely further relaxation of exchange controls will limit interest rate cuts after that, Van der Merwe says, though rates may fall even further in 2000, depending on international as well as domestic economic conditions.
Consumers should not expect interest rates to drop as quickly as they have over the last few months, agrees Jos Gerson, chief economist at Merrill Lynch.
Van der Merwe expects a modest recovery in the South African economy in the second half of this year because of lower interest rates, some tax relief, the demutualisation windfall and improved demand.
The global economic recovery is still on track, she points out.
The United States and Asian economies are strong, Europe may soon join their ranks and although Japan and Latin America are still cause for concern, emerging market jitters have calmed.
Worldwide, policy remains supportive of growth and major interest rate rises are unlikely anytime soon.
Commodity prices ought to continue modest gains into next year, though there will be some volatility, Van der Merwe says.
On the downside is the drop in the gold price, indications of another wave of retrenchments and a slide in South Africa's global competitiveness ranking.
But Van der Merwe does not see these events derailing the cyclical recovery predicted for the second half of this year.
Economic growth will probably be in the region of two percent in the second half of the year, predict the Absa economists, rising to up to 2,5 percent in 2000.
"It is expected that economic growth will be just below one percent in 1999. However... most of this growth will only materialise in the second half of this year."