The International Monetary Fund (IMF) Executive Board has concluded its 2024 Article IV consultation with South Africa, assessing the country's economic performance and outlook. The report highlights several challenges faced by South Africa's economy, including power shortages and disruptions in rail and port operations that limited growth to 0.7 percent in 2023. Economic activity remained subdued in 2024 due to election-related uncertainty and severe droughts. However, stabilization of power generation and the formation of a reform-oriented Government of National Unity led to a rebound in consumer, business, and investor confidence.
Inflation decreased from 5.9 percent in 2023 to an estimated 4.5 percent in 2024, prompting the central bank to cut interest rates by 50 basis points. Unemployment remains high but declined slightly to an estimated 32.8 percent in 2024. Despite these improvements, government deficits are still elevated, pushing public debt above 75 percent of GDP by the end of the year.
Looking forward, real GDP growth is projected to increase to 1.5 percent in 2025 as private consumption and investment recover with stable electricity generation support. Medium-term annual growth is expected at around 1.8 percent as ongoing reforms address electricity and logistics bottlenecks.
The IMF warns that the economic outlook carries significant uncertainty with risks tilted toward the downside due to potential geoeconomic fragmentation, protectionist policies intensification, conflicts escalation, trading partners' slowdown or slower global disinflation alongside tightening financial conditions.
The IMF Executive Board expressed agreement with staff appraisal while welcoming South Africa’s new Government of National Unity for its commitment to reforms addressing long-standing challenges: "Directors agreed with the thrust of the staff appraisal," noting signs of recovery amid heightened global uncertainty.
"Directors welcomed the authorities’ commitment to fiscal prudence," acknowledging plans for deficit reduction and debt stabilization despite increased risks calling for more ambitious consolidation efforts according to most Directors: "Most Directors called for more ambitious fiscal consolidation efforts."
Commending effective monetary management by South African Reserve Bank supporting inflation decline while recommending continued flexible data-driven policy approach amidst uncertainties: "Directors commended the South African Reserve Bank’s effective monetary management."
Efforts safeguarding financial stability were acknowledged including recent banking-resolution safety-net reforms encouraging continued risk monitoring implementation readiness regarding sovereign-bank nexus-related risks: "Directors welcomed authorities’ efforts safeguarding financial stability."
Structural reform efforts aimed at removing critical impediments received commendation urging resolute implementation promoting private sector participation within energy logistics sectors supporting higher greener growth job creation reducing inequality poverty especially among youth enhancing business environment governance labor market flexibility trade facilitation climate goals achievement: "Directors commended authorities structural reform efforts aimed removing critical impediments."
In conclusion wishing success during G20 Presidency welcoming leadership multilateral cooperation support provided by South African authorities: "Directors wished authorities success during South Africa’s G20 Presidency welcoming their leadership support multilateral cooperation."