The International Monetary Fund (IMF) has nudged down below 1% its growth forecasts for South Africa for 2024, citing significant setbacks in the agricultural sector as a key factor affecting the nation’s economic outlook.
In its latest World Economic Outlook (WEO) report released on Friday, the IMF revised its 2024 GDP growth projection for South Africa to a modest 0.8%, down from a previous estimate of 1.1% made in October 2024.
This projected decrease follows a concerning 0.3% contraction in South Africa’s GDP during the third quarter of 2024, largely triggered by a staggering 28.8% decline in the agriculture, forestry, and fishing industry.
The downturn is attributed to diminished economic activity, particularly affecting field crops, which have borne the brunt of recent drought conditions.
Deniz Igan, division chief of the IMF Research Department, attributed the downturn to the drought, underscoring its impact on agricultural output. However, she noted a potential rebound in economic activity, primarily driven by advancing reforms within the electricity sector.
“Now, the 2024 growth actually was slower than we had projected earlier. And the reason for that is the drought-related decline in agricultural activity,” Igan said.
“And we expect [that] with ongoing electricity reforms, there’s going to be an uptick in activity going forward. The impact of the actions that the South African Reserve Bank has taken are showing up, and lower inflation projections are reflecting.
“In addition to monetary policy actions and, related to that, moderated inflation expectations, they are reflecting also decline in global oil prices and now largely closed output gap in the country.”
Despite the downward adjustment for 2024, the IMF remained cautiously optimistic, forecasting a more robust GDP growth of 1.5% for South Africa in 2025, followed by an anticipated uptick to 1.6% in 2026.
These figures have seen little change from the IMF’s predictions in October, although consumer price inflation is now projected to be lower.
For Sub-Saharan Africa, the IMF maintained a consistent growth projection of 4.2% for both 2025 and 2026.
Igan noted ongoing challenges encompassing conflicts and natural disasters that complicated the economic landscape, while the hindrance of limited financing posed further risks to growth.
“And overall, the growth in the region remains subdued and uneven. And the main reasons behind that are the conflicts, the natural disasters, and limited financing,” she said.
“And that limited financing angle is actually what might open the region to further risks, given the global sources of risk that we highlight in our update.
“In particular, a stronger dollar may lead to tighter global financial conditions, and given that many Sub-Saharan African countries already have limited financing and excessive debt burdens that might bring downside risk to growth.”
The IMF projected global growth of 3.3% for 2025, a slight increase from the 3.2% forecast in October, driven by an upward revision for the US, which offset downgrades in other major economies.
Growth for 2026 is also expected at 3.3%, unchanged from the previous projection, and is below the historical (2000–19) average of 3.7%.
IMF chief economist, Pierre-Olivier Gourinchas, cautioned that while global projections remained largely unchanged since October, divergences among economies were widening.
He underscored significant implications arising from elevated trade policy uncertainty, which could dampen demand in key markets, including China, with implications for fiscal sustainability and financial stability.
“Higher inflation would prevent the Federal Reserve from cutting interest rates as initially planned. These policies will also likely strengthen the dollar and tighten financial conditions elsewhere, especially for emerging markets and developing economies,” he said.
“Economic policy uncertainty is elevated with likely policy shifts from many newly elected governments in 2024. In the near term, risks could exacerbate divergences between countries.”
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