The IMF has slashed its growth forecasts for SA and almost every other country in response to the unprecedented tariff announcements by the US and some of its trading partners, warning that they could permanently reduce and reallocate global trade and cut long-term growth rates.
It revised down SA’s expected growth rate to just 1% for this year, rising to 1.3% next year, and it now forecasts global growth of just 2.8% this year, down from 3.3% last year and well below its 3.7% long-term average.
These are just “reference forecasts”, the IMF cautioned, because of the complexity and fluidity of the moment. But the global growth outlook is the same even in an alternative forecast compiled after the US paused some of its tariffs on April 9, though there are shifts within countries.
IMF chief economist Pierre Gourinchas said on Tuesday the landscape had changed since the institution’s last World Economic Outlook update in January. “We’re entering a new era as the global economic system that has operated for the last 80 years is being reset,” he said.
The surge in policy uncertainty was a major driver of the economic outlook and, if sustained, the increase in trade tensions and uncertainty would slow global growth significantly, Gourinchas said.
Though global growth remained well above recession levels, all regions were negatively impacted, and the risk of a global recession had increased to 30%, from 17% in October.
The IMF’s global and SA growth forecasts are both down by half a percentage point compared to its January numbers, but it has taken an even sharper knife to its forecast for the US, which is down 0.9 percentage points to just 1.8% for this year — down from 2.8% last year.
The US is SA’s second-largest trading partner, accounting for about 8% of its exports. The Washington-based Institute for International Finance this week predicted the US could enter recession in the second half of this year, but Gourinchas said the IMF did not see a recession in the US, though the probability had increased from 25% in October to 40% now.
“For the US, the tariffs represent a supply shock that reduces productivity and output permanently and increases price pressures temporarily. This adds to an already weakening outlook,” he said.
The IMF said its downward revision for SA reflected “slowing momentum from a weaker than expected 2024 out-turn, deteriorating sentiment due to heightened uncertainty, the intensification of protectionist policies and a deeper slowdown in major economies”.
More detail on SA is expected in its Sub-Saharan Africa report, due out on Friday. It has revised down its forecast for the region by 0.4 percentage points to 3.8% for 2025, down from 4% in 2024, but has kept its 2026 sub-Saharan forecast unchanged at 4.2%.
The IMF has tended to be more bearish than most on SA’s prospects, and its new forecast is well below the Bloomberg consensus, which was recently cut to 1.5% from 1.7%, rising to 1.6% this year.
Still, the consensus may still be lagging the full impact on SA of the global trade war the US has unleashed, and the IMF is not far below economists such as Goldman Sachs, whose latest forecast for this year is 1.2% and 2% for 2026.
SA’s growth has averaged hardly more than 1% over the past decade, far behind its population growth rate of 1.6%, so that South Africans have, on average, been getting steadily worse off.
The latest forecasts suggest the global downturn will derail hopes that SA could lift its growth rate towards 2% or even 3% over the next couple of years as structural reforms take root.
The IMF had already expressed concerns about slower-than-expected global disinflation, saying interest rates were likely to remain high for longer, but its latest forecasts increases global inflation by 0.1 percentage points this year and next, with advanced economies revised up but emerging market and developing economies revised slightly down for 2025.
It also warned on Tuesday that global financial stability risks had grown significantly, driven by tighter financial conditions and heightened trade and geopolitical uncertainty.
A key vulnerability is that the US now accounts for nearly 55% of the global equity market, up from 30% two decades ago, and valuations of some assets remain stretched despite recent sell-offs, the IMF said in its latest financial stability report.
Also, sovereign debt levels continue to rise, “seemingly outpacing growth in market infrastructure tasked with ensuring smooth market functioning”.
“Core government bond markets may see elevated volatility, especially those in countries with high debt levels,” the IMF said.
Update: April 22 2025
This story has been updated with new information.
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