IMF raises 2023 GDP world growth forecast – even, perplexingly, for South Africa

31 Jan 2023

The International Monetary Fund (IMF) this week raised its growth forecasts for the global economy slightly for 2023 to 2.9% from 2.7% in its October World Economic Outlook report. Perplexingly, it also raised its forecast for South African growth by 0.1 percentage point to 1.2% – a forecast that seems barely credible.

The driving forces behind the upward revision for global gross domestic product (GDP) growth are China’s reopening and the ebbing of worldwide inflation pressures.

“China’s sudden reopening paves the way for a rapid rebound in activity. And global financial conditions have improved as inflation pressures started to abate. This, and a weakening of the US dollar from its November high, provided some modest relief to emerging and developing countries,” the Washington-based lender said.

“Accordingly, we have slightly increased our 2022 and 2023 growth forecasts. Global growth will slow from 3.4% in 2022 to 2.9% in 2023, then rebound to 3.1% in 2024,” it said.

The forecast of global growth of 2.9% for 2023 is an improvement on the previous one of 2.7%, but the 2024 prediction of 3.1% is a slight reduction from 3.2% previously.

What really stands out for a South African audience is the upward revision for 2023 growth against the backdrop of record levels of rolling blackouts. Quite frankly, this seems barely credible.

The IMF noted that growth is expected to halve this year compared with 2022, “reflecting weaker external demand, power shortages, and structural constraints”. But it still raised its projection for South African growth to 1.2% from 1.1% previously.

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This stands in stark contrast to the 0.3% forecast made recently by the South African Reserve Bank, which pointedly said that the “scale of load shedding” would shave as much as 2 percentage points off growth in 2023.

Global accountancy firm PwC said this week that the load shedding toll on economic growth last year might have been as much as 5 percentage points.

Read more in Daily Maverick: “PwC estimates rolling blackouts knocked up to five percentage points off SA’s 2022 GDP growth”

On behalf of a friend, this correspondent would like to ask what the IMF staff in Pretoria is smoking, because it must be pretty good.

Still, China’s improved prospects – and those of global growth more generally – bode well for the prices of the commodities South Africa produces and exports, such as iron ore and platinum group metals. That can certainly support South Africa’s economic growth profile.

But unless such prices go to the moon, they can hardly compensate in a significant way on the GDP front for the crippling impact of rolling blackouts and the other gaping potholes opened by South Africa’s failing state.

If the South African Reserve Bank, which often overshoots on its growth projections, has pegged 0.3%, expect South Africa’s economy to fall well short this year of the IMF’s forecast. DM/BM

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