The International Monetary Fund (IMF) has revised down South Africa’s 2024 growth forecast by a marginal 0.1% from a January forecast of 1%, to 0.9%.
It noted that fiscal pressures are anticipated for many of the countries holding elections this year, including South Africa.
The IMF expects the global economy to grow by 3.2% in 2024, as well as next year.
In its latest World Economic Outlook report, the IMF notes that the global economy has remained resilient despite numerous headwinds, including the impact of the pandemic and a Russia-initiated war against Ukraine.
It further notes that global inflation is expected to continue in a downward trajectory well into next year.
Chief Economist at the IMF, Pierre-Olivier Gourinchas, says elevated geopolitical tensions in the Middle East may result in higher oil prices and increased global inflation.
“We looked at a scenario where we would have more geopolitical tensions that would result in elevated oil prices, energy prices and shipping costs. What we find is that this would lead to higher price pressures in the global economy, there would be higher inflation, there would be lower output and roughly the estimates that we have for a sustained increase in oil prices by about 15% would be an increase in global inflation of about 0.7%.”
Earlier this year, the IMF attributed its downward revisions of South Africa’s economy to persistent logistics constraints and a shortage in the supply of electricity.
Anticipating fiscal pressures from the elections, it encourages countries to create fiscal space by saving budgetary resources and reducing public debt.
Gourinchas elaborates.
“A key priority is to rebuild fiscal buffers especially in an environment with high real interest rates, modest growth and elevated debts. Unfortunately, planned fiscal adjustments are often insufficient and could be derailed further given the record number of elections this year, fiscal consolidations are never easy but it is best not to wait markets dictate their conditions, credible fiscal consolidations can help lower funding costs improve fiscal headroom and financial stability.”
The 2024 IMF World Economic Outlook report projects that South Africa’s economy will grow by 1.2% in 2025.
