IMF has more bad news for South Africa

The International Monetary Fund has again taken an axe to South Africa’s growth prospects, cutting expectations by 0.5% pts for 2025 to just 1.0%.

The IMF published is April update to its World Economic Forecast on Tuesday (22 April), laying out its expectations for the global economy amid an escalating tariff war launched by the United States.

According to the group, the impact of the US tariffs will be far-reaching, and no economy will escape the shockwaves set to follow.

However, reflecting the chaotic and unpredictable nature of their progenitor, US President Donald Trump, there is a high degree of uncertainty about the full impact of the war.

In every scenario laid out by the IMF, though, the impact on the global economy is negative.

The IMF noted that, following a series of shocks starting with the Covid-19 pandemic in 2020 and then the Russian invasion of Ukraine in 2022, 2024 was a relatively benign year in terms of econmomic growth.

By January 2025—the time of its last update—most forecasters saw much of the same for the years ahead.

However, since the release of its last update, a series of new tariff measures by the United States and countermeasures by its trading partners have been announced and implemented.

This culminated in near-universal US tariffs on April 2, bringing effective tariff rates to levels not seen in a century, it said.

“This on its own is a major negative shock to growth,” the IMF said.

“The unpredictability with which these measures have been unfolding also has a negative impact on economic activity and the outlook.”

In previous updates, the finance group provided a baseline assumption for its forecasts. However, given the chaos unfolding, it now has a ‘reference’ forecast, with scenarios branching from that.

This forecasts positions global growth at 2.8% in 2025, down from the 3.3% projection in January.

In the reference forecast, growth in advanced economies is projected to be 1.4% in 2025, due to the impact of the tariffs on highly-integrated trade.

Growth in the United States is expected to slow to 1.8%, 0.9% points lower than the projection in the January update.

In emerging markets and developing economies, growth is expected to slow down to 3.7% in 2025 and 3.9% in 2026, with significant downgrades for countries affected most by recent trade measures, such as China.

South Africa goes from bad to worse

The IMF noted that, even with the tariff shock, the world is likely to avoid a global recession. However, it warned that this estimate masks substantial variation across countries.

“Tariffs constitute a negative supply shock for the implementing jurisdiction, as resources are reallocated towards the production of less-competitive items with a resulting loss of aggregate productivity and higher production prices,” the IMF said.

“In the medium term, we can expect tariffs to decrease competition and innovation and increase rent-seeking, further weighing on the outlook.”

The outlook for South Africa is much dimmer, with the country already suffering from entrenched stagnation.

The IMF slashed the country’s forecast from the 1.5% projection in January to just under 1.0% in April. This is a significant cut, which follows a similar series of cuts to 2024’s forecasts.

It also does not help the dire economic decline, where GDP growth is not keeping up with or exceeding population growth, resulting in the country becoming poorer on a per capita basis.

The end result is also likely to be worse than projected.

The IMF’s forecast of 0.8% for GDP growth in 2024 was overestimated, with the final result coming in at 0.6%.

Things do not look better beyond 2025, with growth expectations for 2026 also cut by 0.3% points from 1.6% to 1.3%

The IMF’s projections max out at South Africa achieving 1.8% growth in 2030, with the medium-term showing a slow crawl to reaching these relatively low levels of growth.

Notably, the cut to the GDP forecast in 2025 is in line with most economists who project a small range between 1.0% and 1.5%. It is also significantly lower than National Treasury’s projections of 1.8%.

The outlook to 2030 also flies in the face of President Cyril Ramaphosa’s lofty ambitions of achieving 3% growth in the near term.

At the start of the year, the Ramaphosa-led GNU expressed confidence in implementing the reforms needed to boost South Africa’s productivity and create jobs.

However, in addition to the external pressures now being applied by the global tariff war, the GNU itself has taken significant missteps, with the future of the coalition still in question.