South Africa: 2024 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for South Africa

2024ARTICLE IV CONSULTATION—PRESS RELEASE;STAFF REPORT;AND STATEMENT BY THE EXECUTIVEDIRECTOR FORSOUTH AFRICA Under Article IV of the IMF’s Articles of Agreement, the IMF holds bilateral discussionswith members, usually every year. In the context of the2024Article IV consultation withSouth Africa, the following documents have been released and are included in thispackage: •APress Releasesummarizing the views of the Executive Board as expressed during itsJanuary27,2025,considerationof the staff report that concluded the Article IVconsultation withSouth Africa. •TheStaff Reportprepared by a staff team of the IMF for the Executive Board’sconsideration onJanuary27, 2025,followingdiscussions that ended onNovember25,2024, withthe officials ofSouth Africaon economic developments andpolicies. Based on information available at the time of these discussions, the staffreport was completedonJanuary7, 2025. •AnInformational Annexprepared by the IMFstaff. •AStatement by the Executive DirectorforSouth Africa. The documents listed below have been or will beseparately released. -Selected Issues TheIMF’s transparency policy allows for the deletion of market-sensitive information andpremature disclosure of the authorities’ policy intentions in published staff reports andother documents. Copies of this report are available to the public from International Monetary Fund•Publication ServicesPO Box 92780•Washington, D.C. 20090Telephone: (202) 623-7430•Fax: (202) 623-7201E-mail:publications@imf.org Web:http://www.imf.org International Monetary FundWashington, D.C. IMF Executive Board Concludes2024Article IV ConsultationwithSouth Africa FOR IMMEDIATE RELEASE Washington, DC–January30,2025:The Executive Board of the International MonetaryFund (IMF) concluded the Article IVconsultation1withSouthAfrica. South Africa’s economy has continued to face challenges in recent years.Power shortagesand disruptions to rail and port operationsconstrainedgrowth to 0.7 percent in 2023.Activityremained subdued in 2024,given election-related uncertainty in the firsthalfof the yearandseveredroughts.Nonetheless,power generationwasstabilizedand, following the formation ofareform-orientedGovernment of National Unity in June,consumer,business, andinvestorconfidencerebounded.Inflationmoderatedfrom 5.9 percent in 2023 toanestimated4.5percent in 2024,withthecentral bankcuttinginterest ratesby 50 basis pointsin2024.While still high, unemploymentdeclined toan estimated 32.8 percent in 2024.Governmentdeficitsremained elevated,pushing public debttoabove 75percent of GDPby end-2024. Looking ahead,real GDPgrowth isprojectedtoaccelerateto 1.5 percent in 2025, driven byrecovering private consumption and investmentsupported bystable electricity generation.Over the medium term,annualgrowth is expected toreach 1.8 percent, as investmentimproves gradually on the back of ongoing reformefforts to address electricity and logisticsbottlenecks.Inflationis projected to average 4 percent in 2025andstabilizeatthemidpoint oftheSARB’starget range(4.5 percent)inthe medium run.With fiscaldeficits projected to stayelevatedover the medium term,publicdebt isexpectedto continue to rise. The outlook remainsmarkedby high uncertainty, with the balance of risks tilted to thedownside.Key downside external risks relate to afurther deepening of geoeconomicfragmentation and intensification of protectionist policies, an escalation of ongoing conflicts, adeeper slowdown inmaintrading partners, or slower global disinflation and tightening financialconditions. Domestically, resistance to and delays in the implementation of needed reformscouldadd to downside risks.On the upside, faster andmore ambitious reform implementationbythe newgovernment, or stronger global growth, couldboostconfidenceand growth. Executive Board Assessment2 “Directorsagreed with the thrust of the staff appraisal. They welcomed South Africa’s newGovernment of National Unity and its commitment to reforms aimed at addressinglong-standing challenges. While there are signs of recovery, economic activity remainssubdued amid heightened global uncertainty and long-standing structural impediments. Against this background, Directors emphasized the importance of prudent macroeconomicpolicies complemented by ambitious structural reforms to support macroeconomic stability andplace the economy on a path toward higher, more inclusive, and greener growth. “Directorswelcomed the authorities’ commitment to fiscal prudence, including plans to reducethe fiscal deficit and stabilize debt. Given increased risks, most Directors called for moreambitious fiscal consolidation efforts to lower debt to more prudent levels andrebuild fiscalbuffers, although a few felt that the authorities’ preferred approach may be more appropriategiven political economy considerations. Directors considered that an evenly paced fiscalconsolidation focused on cutting inefficient spending while protecting priority social andinfrastructure spending, and