A better outlook, but not for South Africa
The International Monetary Fund has published its July update to its World Economic Outlook report, which shows a more optimistic forecast for global GDP growth, but not for South Africa.
The latest update sees global GDP output in 2025 lifting to around 3%, up from the 2.8% forecast back in April.
The April forecast presented a far more uncertain economic environment for global markets in the face of rapid and upredictable moves by the United States’ Trump administration, and its onslaught of trade tariffs.
In the months that followed, while uncertainty persisted and still persists, markets have calmed slightly, with US President Donald Trump’s big talk proving to be more bluff and bluster than bite.
According to the IMF, the 3% forecast reflects front-loading ahead of tariffs, lower effective tariff rates, better financial conditions, and fiscal expansion in some major jurisdictions.
“Global growth in the first quarter of 2025 was 0.3 percentage points above that predicted in the April WEO,” it said.
“International trade and investment drove activity, while private consumption was more subdued across major jurisdictions.”
For many markets that faced tariffs upwards of 50% from the US, these have been negotiated far lower, and various trade deals have been made.
As a result, global inflation is expected to fall, but US inflation is predicted to stay above target as US importers and consumers will bear the cost of the tariff war.
The IMF also warned that downside risks from potentially higher tariffs, elevated uncertainty, and geopolitical tensions persist.
The July forecasts for global growth are higher than the rates expected in April, at 3% in 2025 and 3.1% in 2026.
However, the international financier pointed out that these projections are still below the forecasts made at the end of 2024. This reflects the reality of the uncertainties that still persist in the market.
“Overall, risks to the outlook remain tilted to the downside, as in the April WEO,” the IMF said. “The precarious equilibrium of trade policy stances assumed in the baseline could be disturbed.”
While the “new equilibrium” could have tariff rates similar to those today, it could also be one in which rates are much higher, negotiations break down, and an escalation of protectionist measures restarts.
Forecasters are also fixated on geopolitical tensions and potential escalations of war. Overall, the picture ahead is not clear, and it is weighing on global growth prospects.
No turn for South Africa
Worryingly, while projections for global growth have lifted, South Africa has been left out in the lurch.
In April, the IMF slashed the country’s forecast from the 1.5% projection in January to just 1.0%. This was a significant cut and followed a similar series of cuts to 2024’s forecasts.
The IMF’s forecast of 0.8% GDP growth in 2024 was overestimated, and the final result was 0.5% (restated).
And things did not look better beyond 2025, with growth expectations for 2026 also cut by 0.3 percentage points from 1.6% to 1.3%
The good news for South Africa in the July review is that the April forecasts have not deteriorated further—the projections are unchanged.
However, this means that the dire conditions of April 2025 have not changed, even as most of the rest of the world has seen some improvement.
A major factor impacting this is that the original 30% tariff forecast to hit South Africa back in April remains in place, with the Trump administration expected to implement this rate from 1 August.
While many of the United States’ other major trading partners have managed to negotiate a lower rate, South Africa has been given the cold shoulder and no extension to fight for a better deal.
According to local economists, the 30% tariff will likely have a direct and negative impact on South Africa’s GDP growth, with Investec chief economist Annabel Bishop pegging the impact at -0.2 percentage points of growth.
Economist Dawie Roodt said that this hit to GDP is one of many small things that are chipping away at South Africa’s economic growth, adding up to a much larger disaster for the country.
He noted that South Africa’s growth projections often start out being ambitiously large, and consistently get cut with each new statistical release.
South Africa’s growth has stagnated for the last 15 years, averaging just 0.7% over the last decade, and barely scraping by over the past few years.
Meanwhile, the country’s population keeps growing, making South Africans poorer per capita, and the government continues to adopt anti-growth policies and pursue unaffordable projects.
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