The South African government must take swift action to tackle ongoing structural issues such as public debt and high unemployment, according to the International Monetary Fund (IMF), which issued a statement following its financing review discussions on Tuesday.
“South Africa’s structural challenges risk further eroding living standards, despite the country’s resilience in the face of massive disruptions,” the IMF warned. The institution pointed out that while economic growth in South Africa remained positive in 2023, unprecedented power shortages and bottlenecks in railways and ports have significantly hampered progress.
The IMF emphasized that despite the economy’s resilience, per capita income growth continues to decline. Public debt is still on the rise, and both unemployment and poverty remain at unacceptable levels. The organization urged the new national unity government to seize the opportunity during its term to implement bold reforms that could address these long-standing issues and unlock the full potential of the economy.
“Such a mandate could shift the economy from a path of low growth, high debt, and deteriorating living standards to one of robust growth, fiscal sustainability, and shared prosperity,” the IMF said.
However, achieving these goals will require decisive structural and fiscal reforms, paired with prudent monetary and financial policies, the IMF stressed.
The statement highlighted that wide-ranging reforms in the energy and transport sectors, including measures to increase private sector participation, are crucial to revitalizing economic activity, boosting exports, and supporting the country’s green transition.
According to South Africa’s statistics agency, the country’s economy saw a modest recovery of 0.4% in the second quarter of 2023, after flatlining in the first three months of the year. However, overall growth has slowed to 0.7% in 2023, down from 1.9% in 2022, significantly lagging behind its emerging market peers.
Economists have warned that persistent electricity blackouts and logistical challenges are taking a heavy toll on the economy, dampening business investment and curbing household spending. Growth is projected to reach just 1.1% this year, with a gradual rise to 1.7% by 2026.
