{"id":809783,"date":"2025-01-31T14:30:00","date_gmt":"2025-01-31T12:30:00","guid":{"rendered":"https:\/\/businesstech.co.za\/news\/?p=809783"},"modified":"2025-01-31T14:26:57","modified_gmt":"2025-01-31T12:26:57","slug":"imf-sends-a-warning-to-south-africa-4","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/government\/809783\/imf-sends-a-warning-to-south-africa-4\/","title":{"rendered":"IMF sends a warning to South Africa"},"content":{"rendered":"\n

The International Monetary Fund (IMF) has warned that several ongoing issues in South Africa\u2014including elevated fiscal deficits and higher public debts \u2014might dampen its economic prospects for the coming years.<\/p>\n\n\n\n

The IMF published the outcome of its Article IV Consultation with South Africa, which was held from 11 to 25 November 2024.<\/p>\n\n\n\n

This requires the IMF to conduct economic and financial assessments of its member countries. <\/p>\n\n\n\n

Notably, the IMF forecasted that real GDP output growth would accelerate from an estimated 0.8% in 2024 to 1.5% in 2025. <\/p>\n\n\n\n

This comes off the back of improved electricity generation, monetary policy easing, and a return of investor and consumer confidence post-elections<\/p>\n\n\n\n

The IMF also projects that growth will reach 1.8% by the end of the decade, supported by ongoing electricity and logistics reforms. <\/p>\n\n\n\n

However, risks are pointed to the downside, which is related to a possible intensification of geoeconomic fragmentation and protectionist policies in the context of an uncertain global environment.<\/p>\n\n\n\n

Although fiscal deficits are moderating, they are still elevated over the medium term<\/strong>. <\/p>\n\n\n\n

The IMF also warned that public debt will likely continue to rise under its baseline scenario<\/strong>, and has recommended a more ambitious-than-envisaged fiscal consolidation.<\/p>\n\n\n\n

This continues to be a huge problem area for the country and one that might get worse in 2025 due to another round of\u00a0likely above-inflation wage hikes for government workers and increased social spending.<\/strong><\/a><\/span><\/p>\n\n\n\n

The fund also indicated that meeting South Africa’s climate goals requires more efforts to increase effective carbon taxation and accelerate the rollout of renewable energy.<\/p>\n\n\n\n

More positively, it expects inflation to stabilise around the midpoint of the central bank’s target range (4.5%).<\/p>\n\n\n\n

The IMF recommended that the central bank continue to manage the normalization of the policy rate toward the neutral level in a flexible and data-driven manner.<\/p>\n\n\n\n

The South African Reserve Bank (SARB) cut interest rates by 25 basis points yesterday, 30 January. This brought the repo rate to 7.50%, which is getting closer to the neutral level of 7.0%. <\/p>\n\n\n\n

However, the IMF also argued that transitioning from a target band, currently 3% to 6%, to a lower point target with a well-calibrated tolerance band at an appropriate time can help strengthen macroeconomic stability.<\/p>\n\n\n\n

The SARB has regularly called for a lower inflation target from the National Treasury, which it argues will improve South Africa’s competitiveness. <\/p>\n\n\n\n

Other more positive aspects for South Africa include the ongoing banking resolution and safety-net reforms, together with macro-prudential measures to bolster capital buffers.<\/p>\n\n\n\n

The IMF also welcomed ongoing electricity and logistics reforms, which aim to alleviate critical supply constraints, and called for their ambitious implementation.<\/p>\n\n\n\n

Government\u2019s response<\/strong><\/h2>\n\n\n\n

National Treasury said that the IMF\u2019s concerns are aligned with the government\u2019s response to addressing immediate and long-term economic challenges.<\/p>\n\n\n\n

It said that South Africa’s economic growth prospects are poised to recover in 2025, following a lacklustre economic performance in 2023 and 2024, as household consumption gradually increased.<\/p>\n\n\n\n

This was supported by rising purchasing power, employment recovery and wealth gains. <\/p>\n\n\n\n

The National Treasury is estimating growth to increase from an expected 1.1% in 2024 to 1.7% in 2025, above and below the IMF’s projections, respectively.<\/p>\n\n\n\n

Moreover, risks to the domestic outlook are seen as more balanced than at the time of the 2024 Budget Review.<\/p>\n\n\n\n

It added that it is committed to fiscal consolidation and to setting debt on a sustainable path, noting that the fiscal year 2023\/24 was also a major success, with the first primary surplus in 15 years being recorded in 2023\/24.<\/p>\n\n\n\n

A main budget deficit of 4.7% of GDP is expected for the current year, which is then expected to decline to 4.3% in the following financial year. <\/p>\n\n\n\n

“Meanwhile, debt as a percentage of GDP is expected to stabilize in the 2025\/26 financial year, with debt-service costs as a percentage of revenue also peaking at the same time,” said Treasury. <\/p>\n\n\n\n

“The current focus of South Africa\u2019s reform agenda includes the stabilisation of the electricity grid, enhancing the efficacy of freight and ports operations, implementing e-Visas, as well as prioritizing the advancement of targeted industries to enhance the business climate and promoting equitable growth.” <\/p>\n\n\n\n

“Nearly 94% of the reforms aimed for implementation by 2024 have been accomplished or are significantly progressing.”<\/p>\n\n\n\n

It added that following the success of Operation Vulindlela’s first phase, it will now target reversing local government decline, tackling spatial inequality and advancing a digital government to improve service delivery. <\/p>\n\n\n\n

Operation Vulindlela is a joint initiative by the Presidency and National Treasury to unlock growth in the local economy and has dealt with electricity, water telcos and visa reforms. <\/p>\n\n\n\n

National Treasury added that ongoing efforts to exit the Financial Action Task Force’s grey list during 2025 are underway, with 16 of the 22 action items having been addressed. <\/p>\n","protected":false},"excerpt":{"rendered":"

Although progress is being made in South Africa, the International Monetary Fund has flagged several areas that still need improvement\u2014especially public debt.<\/p>\n","protected":false},"author":95,"featured_media":660715,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[23],"tags":[2722,853],"class_list":["post-809783","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-government","tag-imf","tag-south-africa"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/809783","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/users\/95"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/comments?post=809783"}],"version-history":[{"count":3,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/809783\/revisions"}],"predecessor-version":[{"id":809835,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/809783\/revisions\/809835"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media\/660715"}],"wp:attachment":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media?parent=809783"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=809783"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=809783"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}