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IMF lowers SA growth forecast below 1%

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The International Monetary Fund (IMF) has lowered South Africa’s growth forecast for 2024 slightly as Africa’s most-industrialised economic growth stalls, in spite of the global economy remaining remarkably resilient.

In its World Economic Outlook for April published yesterday, the IMF said South Africa’s gross domestic product (GDP) will grow by 0.9% this year and 1.2% next year.

This growth forecast is slightly down from the 1% the Washington-based lender projected in January, but significantly lower than its forecast six months ago in October 2023 when it saw growth expanding by 1.8% in 2024.

It is also in line with Fitch Ratings agency’s forecast, but detracts from Moody’s more optimistic 1.5% forecast and the SA Reserve Bank’s (Sarb) 1.2% GDP growth for this year.

Momentum Investments economist, Sanisha Packirisam, said the big downgrade to SA’s GDP growth in the IMF’s January update was due to increased concerns over SA’s logistical woes.

However, Packirisamy said the severity of crippling load shedding has been 50% lower year-to-date in comparison to what was experienced in 2023 year to date.

“As such, the detraction from energy constraints on growth this year is likely to be less than that of last year. The Sarb estimates that load shedding shaved off 1.5 percentage points of growth last year and is expected to only detract 0.6 percentage points from growth this year,” she said.

“The IMF is likely taking into consideration a weak investment profile (marred by policy and political uncertainty) outside of spending on renewables, and also likely takes into account pressure on the export side from markets with a weaker growth outlook such as Germany and the UK, which together account for 14% of SA’s exports.”

South Africa’s economy has remained depressed below the 3% consistent annual growth required to create sustainable jobs and better standards of living.

Anchor Capital investment analyst, Casey Sprake, said the difference between the IMF’s and the Sarb’s forecast in itself did not mean that much, given that both were equally dismal.

Sprake said such minimal growth rates did not lead to meaningful improvement in the economic reality of most South Africans. “The average SA consumer is in fact becoming poorer – with the latest data from the IMF indicating that SA’s GDP per capita is now below the average for emerging economies – and at about the same level as in 2005

“Looking ahead, we anticipate that the near-term prospects for growth will remain lacklustre. Moving beyond 2023 and into 2024, we foresee that SA’s growth trajectory will persistently show weakness.”

However, the domestic economy is expected to rebound somewhat though infrastructural constraints across logistics, electricity and increasingly, water, remain a major headwind to growth.

Old Mutual Wealth investment strategist, Izak Odendaal, said the country had made progress on the electricity side.

Odendaal said it was easy to scoff at a three-week load shedding-free streak, but it did mean that SA businesses suffered fewer production interruptions, and were not spending millions on running generators.

“The second is that the scope for interest rate relief in SA has narrowed, which hurts the growth outlook over the next year or two (it doesn’t impact the long-term outlook much, unlike infrastructure),” Odendaal said.

“We’ve also seen some renewed domestic inflationary pressures from higher fuel and food prices that will give the Sarb reason to be conservative in its policy setting.”

Meanwhile, the IMF projected growth in sub-Saharan Africa to rise from an estimated 3.4% in 2023 to 3.8% in 2024, and 4.0% in 2025, as the negative effects of earlier weather shocks subside and supply issues gradually improve.

The IMF also estimated global growth to continue at the same pace of 3.2% in 2024 and 2025, but below the historical (2000–19) annual average of 3.8%, reflecting restrictive monetary policies and withdrawal of fiscal support, as well as low underlying productivity growth.


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