Economic Outline

Economic Indicators

For the latest updates on the key economic responses from governments to address the economic impact of the COVID-19 pandemic, please consult the IMF's policy tracking platform Policy Responses to COVID-19.

South Africa has a highly developed economy and advanced economic infrastructure, making the country the leading African economy and home to around three-quarters of the largest African companies. The national government has been investing in significant policy improvements to restore macroeconomic stability in the country. Even though the government stated that boosting economic growth, cutting unemployment and avoiding downgrades by credit-rating agencies constituted the economic key priorities, South Africa still faces rising public debt, inefficient state-owned enterprises, and spending pressures, which have reduced the country’s global competitiveness. After experiencing a sharp decline of its GDP due to the COVID-19 pandemic (-6.3%) the South African economy bounced back in 2021 at +4.9% (IMF, 2023) driven by exports and household consumption (also thanks to government social transfers and a drawdown of savings, as part of the Economic Reconstruction and Recovery Plan). Sustained high prices and a strong commodity demand continued to boost exports and government revenues in 2022, with the IMF forecasting a growth of 2.1%, before reaching only 1.1% in 2023 (IMF Economic and Political Outlook, October 2022).

South Africa was recently replaced by Nigeria as Sub-Saharan Africa’s largest economy, but the country continues to be a regional leader. South Africa's response to the Covid-19 outbreak has been a standout in the region. However, the effects of the crisis are clearly visible. Government debt reached 68% of GDP in 2022 and is expected to reach 70.7% this year and 73.7% in 2024 (IMF, 2023). The difficulties of public companies (such as the state-owned power company Eskom) are compounded by the problems of private companies caused by the pandemic. Although the government is investing in aid programmes, the financial situation of the companies represents a risk to public finances. The country's budget deficit declined to 5.3% in 2021 and 5.5% in 2022, with the IMF forecasting a deficit at 5.7% in 2023 and 5.8% 2024. Headline inflation, driven by rising food costs and record-high fuel prices, reached 6.7% in 2022 (IMF, 2023) and should average 5.6% in 2023 (FocusEconomics, 2023).

South Africa's unemployment rate increased to 34.6% in 2022 due to the negative economic impact of the COVID-19 pandemic. The IMF estimates that the rate will increase further in 2023 (34.6%) and 2023 (35.6%). Moreover, unemployment rates are much higher among the young population and the black majority of South Africans, further increasing inequality in a country considered one of the most unequal in the world, where nearly half the adult population lives in poverty: according to the Pietermaritzburg Economic Justice & Dignity group, approximately 30.4 million people live below the upper-bound poverty line of ZAR 1,268. The group estimates that 13.8 million people live below the food poverty line.

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