Bright turn for South Africa comes with a big catch
The International Monetary Fund has published its October update to its World Economic Outlook report, which shows a more optimistic forecast for GDP growth in South Africa.
In its latest review, the agency revised its global growth forecast to 3.2% for 2025, slightly higher than the 3% projected in July, while the 2026 estimate remained unchanged at 3.1%.
These forecasts signal a mild slowdown from 3.3% in 2024.
The global financier has also raised South Africa’s GDP expectations from 1% to 1.1%, marking a positive turn for the economy.
The group’s projections now align with local banking groups like Investec, as well as Bloomberg consensus, which was also recently revised upwards to 1.1% y/y.
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).
Things did not look better when the group published its July review, with growth expectations for 2025 frozen at 1.0%.
However, following a surprising GDP print for the second quarter of the year and the local economy proving to be resilient to the global tariff shocks—at least for now—there has been a turn.
GDP growth in the second quarter surprised to the upside, at 0.8% qqsa, on the marked outperformance of the agricultural sector this year, and base effects.
The US’s numerous delays in implementing its universal tariffs have also had a positive impact.
According to Investec Chief Economist Annabel Bishop, US trade policy has been volatile and disjointed to date in 2025, with a number of delays in universal tariff updates until it was finally implemented in early August.
“Indeed, most of South Africa’s exports to the US have avoided this tax for most of the year,” she said, contributing to the IMF’s revisions for South Africa’s GDP to 1.1% in 2025.
Unfortunately, this more positive turn belies the continued pressure on the longer-term outlook.
2026 expected to be tougher
On the downside, the IMF expects South Africa’s growth in 2026 to be lower.
The July projections for 2026 cut GDP expectations by 0.3 percentage points from 1.6% to 1.3%. The October outlook cut this down another 0.1 percentage points to 1.2%.
The group attributed this to South Africa’s position as a commodity exporter in the wider context of global markets being under pressure due to the US tariffs, which are likely to remain in effect.
Local economists have also noted that the real impact of the tariffs on South Africa will only be felt in the new year.
According to Bishop, the IMF’s forecast is below Investec’s projection of 1.5% growth in 2026.
“We continue to anticipate alleviations in the domestic freight crisis, driving faster export-led economic growth domestically,” she noted.
The Bloomberg consensus for 2026 growth was also recently revised down to 1.5% y/y, from 1.6% y/y, with more severe protectionism from the US seen as impacting global and local growth.
Bishop noted that concerns over US and global growth in 2025 and 2026 have had an impact on manufacturing production and sentiment, resulting in a suppressing effect on commodities’ prices, excluding precious metals.
This has had a knock-on effect on South Africa’s prospects.
In this context, the IMF flagged the uncertain global environment and recommended that countries “restore confidence through credible, transparent, and sustainable policies”.
“Trade diplomacy should be paired with macroeconomic adjustment. Fiscal buffers should be rebuilt,” it said.
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