The International Monetary Fund (IMF) has maintained South Africa’s 2024 growth forecast below 1%, but revised downwards sub-Saharan Africa amid weaker than expected activity in the first quarter.
In its World Economic Outlook, the IMF yesterday said South Africa’s gross domestic product (GDP) would grow by 0.9% this year in spite of the improvement in the logistics sector, supply of electricity, and the suspension of load shedding.
This is the same GDP forecast that the IMF also made in April, as the country was still experiencing rotational power cuts even though they were not as frequent as in 2023.
For 2025, the IMF forecast South Africa’s GDP growth to remain at 1.2% in 2025, the same forecast it gave in April.
Meanwhile, the IMF said the forecast for growth in sub-Saharan Africa was revised downwards, mainly as a result of a 0.2 percentage point downwards revision to the growth outlook in Nigeria, amid weaker than expected activity in the first quarter of this year.
The IMF’s global growth projections were also unchanged at 3.2% this year, and slightly higher at 3.3% for next year but there have been notable developments beneath the surface since the April outlook.
“Growth in major advanced economies is becoming more aligned as output gaps are closing. The United States shows increasing signs of cooling, especially in the labour market after a strong 2023. The euro area, meanwhile, is poised to pick up after a nearly flat performance last year,” said the IMF’s chief economist Pierre-Olivier Gourinchas.
“Asia’s emerging market economies remain the main engine for the global economy. Growth in India and China is revised upwards and accounts for almost half of global growth. Yet prospects for the next five years remain weak, largely because of waning momentum in emerging Asia. By 2029, growth in China is projected to moderate to 3.3%, well below its current pace.
As in April, the IMF projected global inflation will slow to 5.9% this year from 6.7% last year, broadly on track for a soft landing.
But in some advanced economies, especially the US, the IMF said progress on disinflation has slowed and risks are to the upside.
“In our latest World Economic Outlook update, we find that risks remain broadly balanced but two downside near-term risks have become more prominent,” Gourinchas said.
“First, further challenges to disinflation in advanced economies could force central banks including the Federal Reserve to keep borrowing costs higher for even longer. That would put overall growth at risk, with increased upwards pressure on the dollar and harmful spillovers to emerging and developing economies.
“Mounting empirical evidence including some of our own points to the importance of global ‘headline’ inflation shocks – mostly energy and food prices – in driving the inflation surge and subsequent decline across a broad range of countries.
“The good news is that as headline shocks receded, inflation came down without a recession. The bad news is that energy and food price inflation are now almost back to pre-pandemic-levels in many countries, while overall inflation is not,” he noted.
BUSINESS REPORT