The assessment finds that the country’s economic recovery from the COVID‑19 pandemic continues to be undermined by repeated global shocks and persistent domestic challenges, including rising protectionism, geopolitical fragmentation and uncertainty in global trade policy. Despite these headwinds, the IMF noted that SA continues to demonstrate resilience, supported by abundant natural resources, strong independent institutions and a credible monetary policy framework.
Economic activity strengthened in 2025, with growth estimated at 1.3%, driven largely by robust private consumption. Inflation moderated to an average of 3.2%, creating room for SA to shift to a lower inflation target of 3%. The current account remained broadly stable despite higher United States (US) tariffs and ongoing global uncertainty, and the banking sector remains well capitalised and stable. Public debt, however, has continued its upward trend, reaching 77% of gross domestic product by the end of March 2025.
Looking ahead, the IMF projects that growth will rise modestly to 1.4% in 2026 and reach around 1.8% in the medium term, supported by resilient consumption and investment linked to structural reforms. Inflation is expected to converge to the new 3% target by late 2027. Although fiscal deficits are declining gradually, they remain sizeable, and public debt is therefore expected to continue increasing in the coming years. The IMF said risks to the outlook are skewed to the downside, citing global fragmentation, trade tensions and domestic reform fatigue. Upside risks include faster reform progress and stronger global growth.
During their assessment, IMF Directors commended SA authorities for preserving macroeconomic stability in a difficult global environment. However, they noted entrenched structural barriers that continue to constrain potential growth and employment. Directors stressed the need for a coherent policy framework to safeguard fiscal sustainability, secure low and stable inflation, ensure financial stability and support higher and more inclusive growth.
Directors welcomed the government’s commitment to improving fiscal sustainability and called for credible, growth‑friendly and socially balanced fiscal consolidation to stabilise and ultimately reduce public debt. They recommended focusing on reprioritising public spending, improving efficiency and equity within the budget and protecting vulnerable communities. Further efforts to strengthen domestic revenue mobilisation were also encouraged. Directors added that a fiscal rule anchored in a prudent debt ceiling could help reinforce credibility and support fiscal adjustment.
The SA Reserve Bank received praise for its success in lowering inflation. Directors welcomed the shift to a 3% inflation target with a narrower band, describing it as an important step toward stronger macroeconomic stability and lower borrowing costs. They urged a flexible, data‑driven approach that helps anchor inflation expectations around the new target. Clear communication and gradual implementation of the target were highlighted as essential for maintaining credibility.
Directors also welcomed reforms aimed at strengthening financial stability, including improvements to bank‑resolution frameworks, financial safety nets and the anti‑money‑laundering and counter‑terrorist‑financing system, which supported SA’s removal from the Financial Action Task Force grey list. They encouraged continued vigilance regarding risks linked to non‑performing loans and the ties between the sovereign and the financial sector. Directors also emphasised the need to improve supervision of both banks and non‑bank financial institutions, and to expand access to finance for small and medium‑sized enterprises while improving payment‑system efficiency.
The IMF welcomed progress in electricity and logistics reforms, which it said are essential to removing critical constraints on growth. Directors encouraged authorities to push ahead with measures that expand private sector participation in these sectors. Additional reforms were encouraged to improve the business environment, strengthen governance, combat corruption, improve labour market flexibility, address spatial inequalities and expand trade diversification.
–ChannelAfrica–
