The International Monetary Fund (IMF) has given finance minister Enoch Godongwana a cushion to deliver optimistic growth forecasts next week during the Medium-Term Budget Policy Statement (MTBPS) as the lender of last resort revised upwards South Africa’s economic growth projections for 2024 and 2025.
Godongwana will table the MTBPS before Parliament on Wednesday, outlining the country’s fiscal position and growth forecast amid a surge in business confidence on the back of improving economic landscape.
The IMF’s growth prospects are 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.
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.
Investec chief economist Annabel Bishop said while 2024 was broadly expected around 1.0% year-on-year, the IMF sees a weaker outlook at 1.5% for 2025 than Investec at 1.7%.
“The IMF does not give a 2026 forecast in the WEO but previously forecast economic growth rate for South Africa also around 1.5 for 2026, while Investec forecasts economic growth at 2.0% with greater fixed investment spend,” Bishop said.
“At an average growth rate of 1.9% seen over the next two years (2025 and 2026), Investec envisages faster recovery for SA, as structural constraints are worked down more quickly, particularly with private sector participation accelerating in the port and rail sectors.
“Investec believe the latter years of the five-year forecast period for GDP growth in South Africa are likely to come out at 2.5% (2027), 2.8% (2028) and 3.1% (2029), with economic growth able to lift further thereafter, leading to higher income per capita and living standard outcomes.”
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.
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