The International Monetary Fund (IMF) has delivered an optimistic revision of South Africa’s economic growth projections for 2024 and 2025, bolstered by a surge in business confidence attributed to a stabilising electricity supply and ongoing structural reforms instituted by the Government of National Unity (GNU).
South Africa has had a good run of stable electricity supply with Eskom not implementing rotational load shedding for more than 200 days while the GNU has given the business industry some confidence due to its appetite to implement reforms.
In its latest World Economic Outlook (WEO), released today during the 2024 Annual Meetings in Washington D.C., the IMF announced an increase in South Africa’s gross domestic product (GDP) growth from its earlier forecast of 0.9% to 1.1% for 2024.
This marks a 0.2 percentage point improvement compared to predictions made in April and July. Furthermore, for 2025, the GDP forecast has been elevated from 1.2% to 1.5%, indicating a 0.3 percentage point upward shift.
The IMF also said the headline consumer price inflation in South Africa was expected to average 4.7% and 4.5% for 2024 and 2025, respectively, not far off from the 4.8% for both 2025 and 2026 forecast by the South African Reserve Bank.
At the regional level, the IMF said Sub-Saharan Africa was anticipated to benefit from a GDP growth uptick from an estimated 3.6% in 2023 to 4.2% in 2025.
This recovery is expected as adverse weather conditions and supply chain disruptions that have plagued the region in recent years start to mitigate.
However, the IMF’s forecasts, revised downwards since April by 0.2 percentage points for 2024, suggest lingering concerns within the broader economic landscape.
IMF economic counsellor and director, Pierre-Olivier Gourinchas, shed light on the revisions, noting that while South Sudan’s economy has suffered a staggering 26% contraction due to ongoing conflict, Nigeria has also seen slower growth amid lacklustre activity during the first half of the year.
Gourinchas expressed cautious optimism about regional growth trends.
“So the Sub-Saharan African region is one that is seeing growth rates that are fairly steady this year compared to last year at about 3.6% and then expected to increase to about 4.2% next year,” Gourinchas stated.
“But now this is certainly a region that's been adversely impacted by weather shocks and in some cases conflict. So the growth remains subdued and somewhat uneven and that's certainly something that we are concerned about.”
Global growth is expected to remain broadly flat—decelerating from 3.3% in 2023 to 3.1% by 2029—and is largely unchanged from WEO forecasts in April 2024 and October 2023.
In the United States, projected growth for 2024 has been revised upward to 2.8%, which is 0.2 percentage point higher than the July forecast, on account of stronger outturns in consumption and nonresidential investment.
In China, the slowdown is projected to be more gradual. Despite persisting weakness in the real estate sector and low consumer confidence, growth is projected to have slowed only marginally to 4.8% in 2024, largely thanks to better-than-expected net exports.
As inflationary pressures continue to dominate global economic discussions, Gourinchas remarked that the battle against inflation is nearing resolution, although some price pressure remains stubborn.
The IMF projects that after peaking at 9.4% year over year in the third quarter of 2022, headline inflation rates could reach around 3.5% by the conclusion of 2025. This forecast is marginally below the 3.6% average level seen between 2000 and 2019.
As South Africa navigates its economic landscape marked by resilience and recovery efforts, the IMF's revised forecasts present a silver lining, reflecting the impact of governance reforms and a stabilising business environment.
BUSINESS REPORT