The International Monetary Fund (IMF) has revised South Africa’s growth forecast upward from 0.6% to 0.9%, chiefly on the strength of lower-than-expected load-shedding, but warns of regional risks associated with soaring inflation, exchange rate pressures and escalating public debt.
This emerged from a presentation on the IMF’s Regional Economic Outlook for Sub-Saharan Africa (SSA) at the University of Cape Town this week.
IMF Director of Regional Studies Luc Eyraud highlighted the pressing regional challenges of soaring inflation, exchange rate pressures, and debt vulnerabilities, noting that these factors formed a pernicious cycle often initiated by escalating public debt.
The presentation came just days before Finance Minister Enoch Godongwana’s Medium-Term Budget Policy Statement (MTBPS), or ‘mini budget’, on 1 November, and amid vigorous debate in political and business circles about the need for reduced government spending to counter South Africa’s deteriorating fiscal position.
Eyraud also underscored the decline in traditional development aid and bilateral lending, and reduced lending from China in particular. The IMF noted that a decline of 1% in China’s growth correlated with a 0.25% dip in SSA’s growth. Against the backdrop of revised Chinese growth forecasts, this was a potential risk to the region, including South Africa.
The IMF said that regional growth of 4% forecast for 2024 hinged on regional economies managing inflation, stabilising exchange rates, and fulfilling debt obligations, all while not losing sight of development goals and structural reforms aimed at lifting living standards. Eyraud emphasised the importance of investing in education as a linchpin of sustainable growth.
All eyes will be on Minister Godongwana next week, when many in the country and abroad will likely assess his MTBPS against the key features of the IMF’s regional economic outlook.
[Image: Gerd Altmann from Pixabay]