The International Monetary Fund (IMF) has revised its forecast for South Africa's economic growth this year, lowering it to 1% from the previously expected 1.8%.
The IMF attributed the downward revision to persistent logistical constraints and power supply shortages.
The IMF's World Economic Outlook also predicts that the global economic growth rate will reach 3.1% in 2024. The report notes that, like many other countries heading into elections, South Africa faces spending pressures that could undermine its fiscal health. Increased spending could delay reforms and lead to higher borrowing costs.
IMF Research Director Daniel Lee says solving the energy and logistics crisis should be a top priority.
He said: “Our forecast for South Africa starts with what happens in 2023, when growth is very low due to the power outages. Growth in 2023 is estimated at 0.6%, but in 2024 is expected to increase gradually towards 1%.”
IMF lowers SA economic growth forecast
The main reasons for the downgrade include further disruption in logistics sectors such as railways and ports, as well as continued challenges in electricity production.
The IMF report also highlights that inflation is falling faster than expected in most regions due to easing supply-side issues and rising interest rates.
Chief economist Pierre-Olivier Grinchat warned central banks against premature easing, stressing the need to avoid the risk of a rebound in inflation that would undermine hard-won confidence.
“Central banks must now avoid premature easing that would lose their hard-won credibility and lead to a rebound in inflation,” Grinsius added. But they should also avoid waiting too long, as there are growing signs of tension in interest-rate-sensitive sectors such as construction, and lending activity has fallen significantly in many countries. ”
According to the IMF, global headline inflation is expected to fall to 5.8% in 2024.
2024 World Economic Outlook Report:
BREAKING: The world is far from recession, according to a new report by the director-general of the International Monetary Fund. Given the collapse of China's economy, the global economy is buoyed by Joe Biden's success.
— Biden's victory (@BidensWins) January 30, 2024
The International Monetary Fund has cut its growth forecast for South Africa this year. The local economy is expected to grow by 1%, lower than the previous forecast of 1.8%.#Morning Live #SABC News
— SABCNews_MorningLive (@MorningLiveSABC) January 31, 2024
