| Recent macroeconomic and financial developments |
| Real GDP growth decelerated from 1.9% in 2022 to 0.6% in 2023, due to persistent electricity shortages, transport sector constraints, and lower international prices for gold and platinum group metals. These factors resulted in a deceleration of growth in the key sectors of agriculture (down 3.2%) and mining (down 1.6%) in 2023 compared with 2022. Manufacturing picked up marginally (up 0.2%) owing to increased demand for petrochemicals and vehicles. Household consumption declined from 2.8% in 2022 to 0.7% in 2023 due to higher interest rates. Inflation declined from 6.9% in 2022 to 6.0% in 2023 reflecting lower international fuel prices. The exchange rate of the South African rand weakened by 12.4% against the US dollar in 2023, to 18.40 rand to the dollar, due to declining terms of trade for South Africa’s main exports. |
| The fiscal deficit remained at 4.6% of GDP during 2021/22 and 2022/23. The current account deficit widened from 0.5% of GDP in 2022 to 1.6% in 2023 as the import bill grew due to depreciation of the rand and lower prices for commodity exports. Official reserves stood at $61.7 billion (5.3 months of import cover) as of November 30, 2023. The financial sector is resilient, well-capitalized, and profitable. Capital adequacy stood at 17.3% in 2023 compared with 17.8% in 2022, nonperforming loans at 45% compared with 4.2%, and liquid assets ratios at 14.9% compared with 13.7%. |
| The poverty rate was estimated at 21.6% in 2023, and the Gini coefficient was 0.63. Overall unemployment stood at 32.1% and youth (25–34 years) unemployment at 39%. South Africa is among the top 10 most unequal countries globally. |
| Outlook and risks |
| The outlook is weakly positive, with GDP growth projected at 1.3% in 2024 and 1.6% in 2025, as new infrastructure investments support the construction and recovery of other sectors. Inflation is expected to moderate at 4.8% in 2024. The fiscal deficit is projected to decline to about 4.3% of GDP in 2023/24, as tax revenue collections improve. The current account deficit is expected to widen to 3.0% of GDP in 2024, due mainly to lower growth of exports than imports because of constraints in the transport sector and power shortages. Key risks include persistent electricity supply shortages, transport bottlenecks, fiscal vulnerabilities arising from bailouts of state-owned enterprises, volatile commodity prices, and climate change shocks. The 2024 general elections could also generate a risk of investor apprehension. However, macroeconomic reforms, investment, and trade are expected to stimulate the economy. |
| Reform of the global financial architecture |
| Progress on structural transformation has been mixed, with an expanding share of services in GDP but a declining share of industry. The services sector contributed 62.6% of GDP in 2022, up from 51.3% in 1990, driven by financial services, real estate, and transport. However, this expansion has shown limited capacity to absorb workers with low skills. Industry’s share of GDP declined from 36% in 1990 to about 25% in 2023. Manufacturing’s share halved to 12% of GDP in 2023 from 24% in 1990, while agriculture’s contribution remained static at 13%. This pattern has led to growth stagnation and slowed job creation. |
| Deepening financial markets and promoting public-private partnerships for infrastructure development are needed to facilitate investment, particularly in the energy sector, which is essential for inclusive economic growth and structural transformation. Reform of the global financial architecture, to improve capitalization and investment, is needed to adequately respond to emerging shocks. Financial deepening is also critical for reducing inequalities by improving access to credit and other financial products that can stimulate economic growth. |
| For full document click the link below:
South Africa: Economic Outlook and GDP |
