Encouraging news for South Africa’s economy

 ·11 Oct 2023

Africa’s economic activity will likely slow again this year amid taxing headwinds but is expected to recover in 2024, according to the International Monetary Fund’s latest regional outlook.

Growth in sub-Saharan Africa’s gross domestic product is forecast to edge down to 3.3% from 4% in 2022 before bouncing back to 4% next year, the IMF said in the report, released Tuesday in Marrakech

“A long-awaited rebound is on the horizon. Inflation is falling, public finances are stabilising, and growth is poised to increase,” the IMF said. “Still, even though the outlook is less ominous, it is still too early to celebrate.”

The region was slammed by the pandemic and surging food prices after Russia’s invasion of Ukraine, with soaring inflation leading to aggressive interest-rate increases around the world.

That’s led to a vicious funding squeeze in Africa amid rising debt-service costs and weakening currencies.

Even so, the IMF voiced cautious optimism.

“Model estimates suggest the region’s economic recovery may already have started,” the IMF wrote in an analysis that carried the hopeful title, “Light on the Horizon?”

South Africa, which accounts for 19.5% of the regional economy and is being hobbled by rolling power shortages and infrastructure bottlenecks, is seen playing a key role in the upswing.

Growth in its economy, which is forecast to grow by 0.9% this year – up from its last forecast in July of 0.3% growth – is predicted to accelerate further to 1.8% in 2024, the IMF said, based partly on continued improvements in the supply of the country’s electricity.

Nigeria, the region’s other economic powerhouse, which has undergone painful reforms since President Bola Tinubu took office in May, is poised to expand 2.6% this year and 3.1% next.

The IMF sees those gains extending to four-fifths of sub-Saharan Africa, though it warned that a two-speed recovery would persist, with nations who depend heavily on exporting raw materials lagging better-diversified economies.

Factors aiding the upturn include the end of the pandemic, more resilient-than-expected consumption and a gradual decline in the rate of inflation around the world.

The South African Reserve Bank (SARB) also recently increased its forecasted economic growth for South Africa to 0.7% from 0.4%.

While households and firms exhibit some resilience, economic growth has been volatile and highly sensitive to new shocks. An improvement in logistics and a sustained reduction in load-shedding, or greater energy supply from alternative sources, would significantly increase growth, the SARB said.

Read: New laws to restrict the hiring of foreign workers in South Africa – with R100,000 fines on the table

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