Global economic activity remained surprisingly resilient amidst the global disinflation of 2022–23, and despite significant central bank interest rate hikes to restore price stability. defying predictions of stagflation and recession.
This is according to the latest World Economic Outlook from the International Monetary Fund which noted that factors such as increased government spending and household consumption, along with unexpected labour force participation growth, contributed to this resilience.
Despite significant interest rate hikes aimed at stabilising prices, households in major economies were able to rely on savings accumulated during the pandemic.
However, as inflation trends towards target levels and central banks shift towards easing policies, tighter fiscal policies may dampen growth prospects, it warned.
Projected global growth for 2024 and 2025 remains at 3.2 percent, with inflation expected to decrease gradually.
Nonetheless, the medium-term outlook is subdued due to factors like weak productivity growth and geopolitical tensions.
A slight acceleration for advanced economies—where growth is expected to rise from 1.6 percent in 2023 to 1.7% in 2024 and 1.8% in 2025—will be offset by a modest slowdown in emerging market and developing economies from 4.3% in 2023 to 4.2% in both 2024 and 2025.
Risks to the global outlook are balanced, with potential downsides including geopolitical conflicts and high government debt leading to tax hikes and spending cuts. On the upside, looser fiscal policies could stimulate short-term economic activity, the IMF said.
It said that central banks must prioritise a smooth transition to lower inflation rates while avoiding premature policy easing. Simultaneously, a renewed focus on medium-term fiscal consolidation is necessary to ensure debt sustainability.
Tailored policy responses and supply-enhancing reforms are essential for increasing growth and reducing debt levels, while multilateral cooperation is vital for addressing geoeconomic fragmentation and climate change.
The forecast for global growth five years from now—at 3.1%—is at its lowest in decades. Global inflation is forecast to decline steadily, from 6.8% in 2023 to 5.9% in 2024 and 4.5% in 2025, with advanced economies returning to their inflation targets sooner than emerging market and developing economies. Core inflation is generally projected to decline more gradually.
The IMF revised its projection for South Africa's Gross Domestic Product (GDP) growth in 2024 to 0.9%. This marks a significant downward adjustment from previous forecasts, which stood at 1.8% in October 2023 and 1% in January. Now, the growth outlook has dipped to below 1%.
Additionally, the IMF has lowered South Africa's growth prospects for 2025, reducing its projection by 0.1 percentage points to 1.2%.
In tandem with sluggish growth, the IMF anticipates that South Africa will grapple with persistently high inflation and unemployment throughout 2024. Consumer price inflation (CPI) is forecasted to average 4.9% for the year, surpassing initial projections of 4.5%.
In 2023, South Africa’s economy grew by only 0.6%. In the February 2024 Budget, the National Treasury said GDP growth has averaged only 0.8% since 2012, and this rate is insufficient to address high levels of unemployment and poverty.
“Long-term growth is highly dependent on improving capacity in energy, freight rail and ports and on continuing to reduce structural barriers to economic activity,” it said.
“The economic growth strategy prioritises macroeconomic stability, structural reforms and improvements in state capability to raise growth rates in a sustainable manner.”
The SARB predicts 1.2% GDP growth for the country in 2024 and attributed the country’s low growth in 2023 to supply-side issues.
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