South Africa’s economic growth is projected to improve in 2025 after two years of weak performance, according to the International Monetary Fund (IMF). The country’s real Gross Domestic Product (GDP) is forecast to rise from 0.8% in 2024 to 1.5% in 2025, driven by better electricity supply, looser monetary policy, and renewed investor and consumer confidence following the elections.
The IMF released its findings on Thursday after completing its Article IV Consultation with South Africa, held from November 11 to 25, 2024. The report acknowledged progress in banking reforms and financial stability measures but raised concerns over rising public debt and challenges in meeting climate goals.
The IMF welcomed ongoing electricity and logistics reforms but called for their swift implementation to ease supply constraints. It also urged the government to raise carbon taxes and accelerate the transition to renewable energy to meet climate commitments. Economic growth is expected to reach 1.8% by the end of the decade, supported by these measures.
The IMF cautioned that risks remain, including global economic uncertainties and potential protectionist policies. It recommended a more aggressive fiscal consolidation plan, as public debt is projected to continue rising. Inflation is expected to remain within the central bank’s target range, with the IMF advising a data-driven approach to interest rate decisions.
Treasury’s Response
The National Treasury said the IMF’s concerns align with its efforts to address immediate and long-term economic challenges. It reiterated its commitment to reforms that support growth, reduce public debt, and improve infrastructure.
According to the 2024 Medium Term Budget Policy Statement (MTBPS), GDP growth is expected to rise from 1.1% in 2024 to 1.7% in 2025, supported by stronger household consumption, job recovery, and increased purchasing power.
South Africa recorded its first primary budget surplus in 15 years for the 2023/24 fiscal year. The main budget deficit is projected to decline from 4.7% of GDP in 2023/24 to 4.3% in 2025/26, with debt expected to stabilize during the same period.
The government’s economic agenda focuses on stabilizing the power grid, improving freight and port operations, expanding the e-Visa system, and developing key industries to boost the business climate. Nearly 94% of targeted reforms for 2024 have been completed or are in progress.
Operation Vulindlela will enter its second phase, introducing initiatives to address local government inefficiencies, reduce spatial inequality, and advance digital governance. The first phase focused on reducing power cuts, improving transport logistics, lowering data costs, and strengthening water supply.
The South African Reserve Bank (SARB) recently conducted its first stress test on major insurance firms, assessing climate-related financial risks. Meanwhile, efforts to remove South Africa from the Financial Action Task Force (FATF) grey list are progressing, with 16 out of 22 action points already completed.
