South Africa growth rate revised downwards

 ·12 Oct 2022

The International Monetary Fund (IMF) has halved its global growth expectations to 3.2% in 2022 from 6% in 2021 amid climbing inflation and monetary policy tightening.

Consequently, South Africa’s growth rate has also been revised downwards. The country is expected to grow by 2.1% in 2022 from 4.9% in 2021, with 2023 expected to drop further to 1.1%. In contrast, Sub-Saharan Africa is expected to grow by 3.7% in 2023.

The IMF’s global growth profile for October 2022 is the weakest economic outlook report since 2001. This is partly due to this year’s economic shocks created by the war in Ukraine, driving up food and energy prices following the coronavirus outbreak.

This has created an environment where soaring costs and rising interest rates have created growth-stifling fears around the globe.

“More than a third of the global economy is headed for contraction in 2022 or 2023,” said IMF economic counsellor Pierre-Olivier Gourinchas in a blog post accompanying the fund’s latest report.

He warned that the world’s three biggest economies – the United States, European Union and China – will continue to stall.

China’s growth, for example, is now at the lowest its been in 40 years at 3.2% if you exclude the 2020 economic crisis.

These conditions are expected to negatively impact advanced and emerging economies – including South Africa – as disruptions in exports and imports with these big three economies will likely be affected by the contractions.

When asked to comment on emerging markets in Africa during an interview with CNBC Africa, IMF division chief Daniel Leigh said that while Sub-Saharan Africa is expected to grow above the global average, the area is vulnerable to lingering effects of Covid – because only 26% of the region is vaccinated compared to the rest of the world’s 66%.

Leigh added that another worrying sign for African countries is debt distress. “Lower growth experienced in the region combined with high inflation has resulted in two-thirds of African countries facing debt distress – that’s more than triple what it was a year ago,” he said.

Leigh noted that the only remedy for stifling growth fears in advanced countries and emerging markets is for central banks to continue to tighten monetary policies with higher interest rates.

He added that government policies could also play a supportive role by riding out the economic downturn without trying to expand, which pushes against what the central banks are trying to do.

Leigh said the overall global outlook is grim, adding that there is a 25% probability that growth will slow to less than 2%, and this has the potential to be among the worst global growth periods since the 1970s.

The risk of policy miscalculation has risen sharply as growth remains fragile and markets show signs of stress. “The worst is yet to come, and for many people, 2023 will feel like a recession,” said Gourinchas.


Read: Cape Town’s unenviable reputation

Show comments
Subscribe to our daily newsletter