The IMF has lifted its SA growth projections for 2023 from 0.6% in its July estimates to 0.9%, citing lower-than-expected load-shedding in the second quarter.
The growth projections for Africa’s most developed country, however, lag behind the international lender’s projections for its peers in Sub-Saharan Africa. The region is estimated to grow by an average of 4%, with developing economies growing at 4.1% in 2023.
The IMF, which released the latest edition of its World Economic Outlook on Tuesday, expects growth for SA in 2024 to be slightly below its 2022 estimates because of the continued power outages, cutting its projections to 1.8%.
The fund’s new forecast comes ahead of the November 1 presentation of the medium-term budget policy statement (MTBPS) by finance minister Enoch Godongwana. The forecast is a bleak prognosis for SA, which is facing a widening budget deficit as total expenditure grows at a faster pace than revenue, raising the prospect of a fiscal crisis.
This is in addition to the long-standing, growth-sapping structural impediments such as the energy crisis, water shortages, poverty and unemployment.
The IMF’s key concerns for the growth prospects of sub-Saharan countries, including SA, are worsening weather shocks, the global slowdown and domestic supply issues in the electricity sector.
In the IMF’s half-yearly economic outlook, the lender paints a slightly optimistic projection of the global economy, which market watchers feared earlier in 2023 would go into recession due to the continued Russia/Ukraine conflict and the lingering effects of the Covid-19 pandemic.
However, the lender remains concerned about China’s real estate crisis and a resurgence of inflation, warning central banks of the risk of cutting interest rates speedily without considering the risks.
The baseline forecast is for global growth to slow from 3.5% in 2022 to 3% in 2023 and 2.9% in 2024, well below the historical average of 3.8%.
Headline inflation continues to decelerate, from 9.2% in 2022 to a projected 5.9% in 2023 and 4.8% in 2024, but most countries aren’t likely to return inflation to target until 2025, the IMF says.
“The global economy continues to recover slowly from the blows of the pandemic, Russia’s invasion of Ukraine and the cost-of-living crisis. In retrospect, the resilience has been remarkable,” said IMF chief economist Pierre-Olivier Gourinchas at a media briefing on Tuesday.
“As a result, projections are increasingly consistent with a ‘soft landing’ scenario, bringing inflation down without a major downturn in activity, especially in the US, where the forecast increase in unemployment is very modest, from 3.6% to 3.9% by 2025.”
Gourinchas warned against geopolitical fragmentation, which impedes global growth.
On the outbreak of fresh violence between Hamas and Israel this week, Gourinchas said it is too early to tell whether it will affect global growth. “Depending how the situation might unfold, there are many very different scenarios that we have not even yet started to explore, so we can’t make any assessment at this point yet.”
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.