IMF holds steady on South Africa’s growth forecast despite regional optimism

The International Monetary Fund (IMF) has confirmed its projections for South Africa’s economic growth, maintaining that the nation will only see an increase of 1% in 2025 and 1.3% in 2026.

This forecast comes amid an upward revision of growth expectations for the sub-Saharan Africa region, showcasing a contrasting outlook for South Africa in the midst of broader regional optimism.

In the latest World Economic Outlook (WEO) released on Tuesday, the IMF's forecast for South Africa remained unchanged, retaining the lower estimates set in April when the organisation had previously cut its forecast by 0.5 percentage points due to slowing activity in key trading partners compounded by rising US tariffs.

According to the IMF’s predictions, South Africa is expected to lag behind regional counterparts.

The forecasts contrast with those from the National Treasury, which anticipates a growth rate of 1.4% in 2025 and 1.6% in 2026, as well as the South African Reserve Bank's more optimistic outlook of 1.2% growth for 2025 rising to 1.8% by 2027.

These discrepancies highlight a deeply concerning divergence between South Africa's economic trajectory and that of its neighbours in sub-Saharan Africa.

While the IMF has kept its growth forecast for South Africa stagnant, it has revised its outlook for the sub-Saharan Africa region to a robust 4.0% for 2025, up from the prior forecast of 3.8%.

The IMF predicts further growth to 4.3% in 2026, indicating a more positive economic climate for many nations within the region.

The IMF's overall assessment includes the acknowledgment that global growth is expected to slow down, as the impacts of recent trade-related disruptions begin to unravel.

The Fund projects global growth rates of 3.0% in 2025 and 3.1% in 2026, both of which remain below the 2024 forecast of 3.3% and the historical average of 3.7% prior to the pandemic.

Pierre-Olivier Gourinchas, the IMF's chief economist, indicated that the anticipated front-loading in international trade has contributed positively to the revised forecasts, although this trend is expected to unwind in forthcoming quarters, potentially dampening activity in 2026.

He emphasised the precarious nature of the current trade environment, warning that rising tariffs could negatively impact global productivity should existing agreements falter.

“Accordingly, we have revised our growth projections upwards from the April 2025 reference forecast, from 2.8% to 3.0% this year, and from 3.0% to 3.1% next year. Most regions are experiencing modest growth upgrades this year and next. This resilience is welcome, but it is also tenuous,” Gourinchas said.

“While the trade shock could turn out to be less severe than initially feared, it is still sizeable, and evidence is mounting that it is hurting the global economy. For instance, compared to our pre-April forecast, global growth is revised downwards by 0.2 percentage points this year. 

“At around 3%, global growth remains disappointingly below pre-COVID average. And we continue to project a persistent decline in global trade as a share of output despite the recent frontloading, from 57% in 2024 to 53% in 2030.”

Gourinchas said risks to the global economy remained firmly to the downside, but warned that the current trade environment remained precarious.

He said tariffs could well reset at much higher levels once the ‘pause’ expires on August 1 or if existing deals unravel. 

“If this were the case, model-based simulations suggest global output would be 0.3% lower in 2026. Without comprehensive agreements, the ongoing trade uncertainty could increasingly weigh on investment and activity,” he said. 

“Further, while exports frontloading has supported global activity so far, firms could become vulnerable if the demand for stockpiled goods does not materialize. The geopolitical environment also remains fragile, with a potential for more negative supply disruptions.”

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