South Africa

South Africa’s GDP growth to decelerate sharply – IMF

The International Monetary Fund (IMF) expects South Africa’s real GDP growth to decelerate to 0.1% in 2023, mainly due to load-shedding.

Staff from the IMF consulted with South African officials from 1 to 17 March as part of their routine economic surveillance.

These officials included officials from the government, the South African Reserve Bank (SARB), state-owned enterprises, parliament, business, labour, and academia.

This consultation culminates in the IMF Article IV Report on South Africa, which is set to be published later this year.

In its concluding statement, the IMF determined South Africa’s near-term growth outlook has deteriorated.

It expects weak growth due to “a significant increase in the intensity of power cuts, as well as the weaker commodity prices and external environment”.

However, the IMF expects growth to rebound in the medium term, although only to about 1.5% per year, with income per capita likely to stagnate.

“This is because of long-standing structural impediments, such as product and labour market rigidities and human capital constraints, offsetting expected improvements in energy supply, higher private spending on energy-related infrastructure, and a more supportive external environment.”

Interest rates

The IMF expects the South Africa Reserve Bank (SARB) to achieve its mission of bringing inflation within the target band of 3% to 6% in the second half of 2023. It expects inflation to reach the mid-point of 4.5% in 2024 and stay there in the medium term.

The key factors behind this expectation are lower food and fuel price inflation and the SARB’s “less accommodative monetary policy stance”.

The IMF recommended South Africa’s pace of withdrawal of monetary policy accommodation remain data dependent and determined that it was “adequate”.

“The SARB’s decisive increases in the policy rate have helped bring down headline inflation and keep inflation expectations anchored.”

However, it recommended that further tightening be warranted if the ongoing energy crisis and tighter global financial conditions threaten to de-anchor inflation expectations.

It recommended that SARB formalise its target by focusing on the mid-point rather than trying to achieve a range. 

The National Treasury acknowledged the IMF’s comments in a statement released today: “Treasury is aware of most of the risks to economic growth and is working on mitigating measures to address these, as detailed in the 2023 Budget Review”.


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