The IMF has revised South Africa’s growth forecast slightly upward, citing stronger-than-expected economic activity in recent quarters, driven largely by robust private consumption.
Following its Article IV consultation mission to South Africa in the first week of December, the IMF said growth is now expected to reach 1.3% in 2025 and 1.4% in 2026, up from earlier projections of 1.1% and 1.2%, respectively.
Yet, even with the upward revision, South Africa remains near the bottom of emerging markets and developing economies, many of which are expected to grow at 3%-4% or more, according to the IMF’s October forecasts.
“Persistent impediments — including product- and labour-market rigidities, spatial disparities, governance weaknesses, inadequate infrastructure and elevated public debt — constrain the economy’s ability to rebound strongly from shocks, create needed jobs, and achieve its true growth potential,” the fund said on Tuesday.
The fund praised the resilience of the South African economy amid growing global turbulence. It pointed to the country’s independent institutions, credible inflation-targeting framework, flexible exchange rate and deep domestic capital markets as core strengths.
With a 3% inflation target in place, inflation is expected to ease to 3.3% in 2025, 3.6% in 2026, and settle at 3% from end-2027.
Still, risks remain tilted to the downside. Global trade tensions, geopolitical uncertainty, and global policy uncertainty could dent exports and trigger capital-flow volatility.
Domestically, any delays in structural reforms or rising disinflation costs could further dampen medium-term growth prospects, the IMF said.
The IMF welcomed the Treasury’s target of achieving a 1.5% primary surplus in the 2026 financial year and a 2.3% surplus by 2028. However, under the fund’s own baseline, public spending is projected to decline more gradually and revenue to underperform relative to official projections in the absence of additional reforms.
To place public debt on a sustainable path, the IMF recommends a more ambitious fiscal trajectory. It argues that a primary surplus of 3% of GDP by 2033 is needed to cut debt to 70% of GDP, with continued surpluses required to reduce the ratio further to 60%.
To support this adjustment, the IMF calls for the adoption of a numerical debt rule, underpinned by primary-balance and expenditure anchors, well-defined escape clauses, and oversight by an independent fiscal institution. Such a rules-based framework, it says, would enhance policy credibility, improve predictability, and help lower fiscal risks.
Structural reforms
According to the IMF, South Africa’s state-led development model has “reached its limits”. With public finances under strain and the state’s capacity overstretched, it argues that the private sector must become the primary engine of job creation and growth.
“Unlocking the potential of the private sector through more ambitious structural reforms remains the only viable option,” the IMF said.
According to IMF analysis, closing just half of South Africa’s structural gap with leading emerging markets could raise real output by up to 9%, lifting medium-term growth to about 3%.
Sustained efforts remain necessary to address corruption and governance weaknesses, particularly in the state and SOEs, the fund said.
It urged the government to establish an independent Office of Public Integrity and Anti-Corruption, ensure the financial and institutional independence of the National Prosecuting Authority, and maintain a robust, up-to-date beneficial ownership registry.
It also called for transparent, merit-based appointments to SOE boards and senior public administration, alongside improved service delivery at the local government level, especially in critical areas such as electricity and water.
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