IMF Executive Board Concludes 2024 Article IV Consultation with South Africa
IMF News, January 30, 2025
Source details
- Canonical URL
- IMF Executive Board Concludes 2024 Article IV Consultation with South Africa
Other formats
Bibliographic details
- Published: January 30, 2025
Recent economic performance and 2024 assessment
- Growth and activity
- Real GDP growth: 0.7 percent in 2023; activity remained subdued in 2024 with growth of 0.8 percent (estimate).
- Constraints on growth included power shortages and disruptions to rail and port operations in 2023; election‑related uncertainty in H1 2024 and severe droughts also weighed on activity.
- Power generation stabilized following the formation of a reform‑oriented Government of National Unity in June 2024, supporting rebounds in consumer, business, and investor confidence.
- Inflation and monetary policy
- Inflation moderated from 5.9 percent in 2023 to an estimated 4.5 percent in 2024.
- The South African Reserve Bank cut interest rates by 50 basis points in 2024.
- Labor market
- Unemployment remained high but declined to an estimated 32.8 percent in 2024.
- Fiscal position and public debt
- Government deficits remained elevated, pushing public debt to above 75 percent of GDP by end‑2024.
Outlook and projections (selected macroeconomic projections)
- Growth
- Real GDP projected to accelerate to 1.5 percent in 2025.
- Medium‑term annual growth expected to reach 1.8 percent as investment improves gradually.
- Inflation
- Inflation projected to average 4 percent in 2025 and stabilize at the midpoint of the SARB’s target range (4.5 percent) in the medium run.
- Fiscal and debt trajectory
- With fiscal deficits projected to stay elevated over the medium term, public debt is expected to continue to rise.
- Selected numerical projections from the staff table (2022–27)
- Real GDP: 1.9 (2022), 0.7 (2023), 0.8 (2024), 1.5 (2025), 1.6 (2026), 1.7 (2027).
- CPI (annual average): 6.9 (2022), 5.9 (2023), 4.0 (2024), 4.5 (2025).
- Unemployment rate (percent of labor force, annual average): 33.5 (2022), 33.1 (2023), 32.8 (2024), 32.7 (2025), 32.5 (2026), 32.3 (2027).
- Gross government debt (percent of GDP): 70.8 (2022), 73.4 (2023), 75.7 (2024), 78.3 (2025), 80.1 (2026), 81.7 (2027).
- Overall balance (percent of GDP): -4.3 (2022), -5.9 (2023), -6.1 (2024), -6.6 (2025), -5.8 (2026), -5.4 (2027).
- Current account balance (billions of U.S. dollars): -1.8 (2022), -5.3 (2023), -7.3 (2024), -7.8 (2025), -8.9 (2026).
- Gross reserves (billions of U.S. dollars): 60.6 (2022), 62.5 (2023), 65.9 (2024).
- Exchange rate (Rand/U.S. dollar, end‑period): 17.0 (2022), 18.5 (2023), 18.7 (2024).
- Social and structural indicators (selected)
- Nominal GDP (2022, billions of US dollars): 407.
- GDP per capita (2022, in US dollars): 6,712.
- Poverty (lower national poverty line, 2015): 40 percent of population.
- Undernourishment (2019): 7 percent.
- Total population (2022, million): 62.
- Urban population (2020, percent of total): 67.
- Life expectancy at birth (2020, number of years): 64.
- Gini coefficient (2015): 65.
- Income share, highest 10 percent of population (2015): 53.
- Income share, lowest 40 percent of population (2015): [value omitted in source text].
Risks, scenarios, and balance of risks
- Overall outlook characterized by high uncertainty with risks tilted to the downside.
- Key downside external risks
- Further deepening of geoeconomic fragmentation and intensification of protectionist policies.
- Escalation of ongoing conflicts.
- A deeper slowdown in main trading partners.
- Slower global disinflation and tightening financial conditions.
- Key domestic downside risk
- Resistance to and delays in implementation of needed reforms.
- Upside scenarios
- Faster and more ambitious reform implementation by the new government.
- Stronger global growth boosting confidence and growth.
Executive Board assessment and policy recommendations
- General assessment
- Directors agreed with the thrust of the staff appraisal and welcomed the new Government of National Unity and its reform commitments.
- Economic activity remains subdued amid global uncertainty and long‑standing structural impediments.
- Prudent macroeconomic policies complemented by ambitious structural reforms are essential to support macroeconomic stability and sustainable, inclusive, greener growth.
- Fiscal policy
- Directors welcomed authorities’ commitment to fiscal prudence, including plans to reduce the fiscal deficit and stabilize debt.
- Most Directors called for more ambitious fiscal consolidation to lower debt to more prudent levels and rebuild fiscal buffers; a few Directors thought the authorities’ preferred approach may be more appropriate given political economy considerations.
- Recommended approach: evenly paced fiscal consolidation focused on cutting inefficient spending while protecting priority social and infrastructure spending, and continuing to strengthen tax administration.
- Most Directors supported introducing a prudent debt anchor supported by a fiscal rule to underpin adjustment and bolster credibility; a few Directors cautioned that a debt ceiling could constrain flexibility.
- Enhancing fiscal transparency and risk management to support resilience of public finances.
- Monetary and financial sector policy
- Directors commended the SARB’s effective monetary management that supported the decline in inflation.
- Recommendation to maintain a flexible, data‑driven approach to monetary policy amid uncertainties.
- Directors saw merit in shifting, at an opportune time, from the current inflation target band to a lower point target; this would require careful design, gradual implementation, close coordination, and appropriate communication.
- Directors welcomed recent banking‑resolution and safety‑net reforms and macro‑prudential policies; encouraged continued monitoring of risks, including sovereign‑bank nexus, and readiness to implement prudential measures.
- Strengthened supervision, including for non‑bank financial institutions, and bolstering the AML/CFT framework remain essential.
- Structural reforms
- Directors commended authorities’ structural reform efforts to remove impediments to growth.
- Urged resolute implementation of ongoing energy and logistics reforms, including promoting private sector participation.
- Recommended additional reforms to enhance the business environment, bolster governance, improve labor market flexibility, facilitate trade, and achieve climate goals to support higher, greener growth and job creation—especially for youth—while reducing inequality and poverty.
- International engagement
- Directors wished the authorities success during South Africa’s G20 Presidency and welcomed their leadership in support of multilateral cooperation.
IMF Executive Board Concludes 2024 Article IV Consultation with South Africa — Press Release No. 25/19 (January 30, 2025).