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Staff Writer

IMF revises growth forecast for South Africa

The International Monetary Fund (IMF) has published its October 2024 World Economic Outlook, showing a more optimistic view of South Africa’s economic growth compared to its April 2024 forecast.


However, the IMF remains concerned about the country’s worsening unemployment crisis.


At the beginning of the year, the IMF reduced its growth forecast to 1% in January, down from the 1.8% predicted in October 2023.


By April, this forecast was further lowered to 0.9%, citing issues with power, water supply, and logistics, as well as political uncertainty ahead of the national elections.


In the latest update, the IMF has revised its growth forecast for South Africa to 1.1% for 2024, slightly higher than the January outlook.


The projection for 2025 has also been increased to 1.5%. Economists estimate South Africa’s GDP growth for 2024 to be between 1.0% and 1.2%, and between 1.5% and 2.2% for 2025.


The government aims for over 3% growth in the near term.


Despite ongoing challenges, there has been a positive shift in addressing these issues. Load shedding has significantly decreased, with Eskom reporting 210 days without power cuts and improvements in generation and plant performance.


Similar efforts are being made to tackle water and logistics problems, inspired by the successful interventions in the electricity sector.


These improvements are being driven by the new government of national unity (GNU), formed after the 2024 elections, which includes the ANC, DA, IFP, and other smaller parties. The GNU is seen as more business-friendly and pro-economic growth, with new ministers from outside the ANC bringing positive changes to governance.


While these reforms will take time to show results, the positive sentiment around the GNU has already boosted markets and supported growth. However, the growth outlook for 2024 and 2025 remains modest, the lowest among major emerging markets, and insufficient to keep pace with population growth.


South Africa’s GDP per capita has declined over the past decade, reflecting poor economic growth and wages not keeping up with inflation. By the end of 2023, GDP per capita was around $6,200, down from nearly $8,000 in the early 2010s. To maintain GDP per capita, economic growth needs to match the population growth rate of approximately 1.5% per year.


The IMF also highlights the persistent unemployment crisis, projecting an average unemployment rate of 33.7% in 2024, up from 33.1% in 2023, and worsening to 33.9% in 2025. According to Stats SA, the official unemployment rate increased from 32.9% in Q1 2024 to 33.5% in Q2 2024, with the expanded unemployment rate rising to 42.6%.

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