South Africa

Economic outlook

The COVID-19 pandemic exacerbated South Africa’s recession that began in late 2019. Real GDP fell 7% in 2020, its steepest decline in over a century. The economy recovered in 2021, as mining and manufacturing grew on the back of increased global demand and higher commodity prices. Improved mobility supported domestic activity. Yet stagnant growth over the past decade contributes to ongoing high unemployment and income inequality. The near-term outlook remains highly dependent on the path of the pandemic and the vaccine rollout. The IMF forecasts 1.9% growth in 2022, supported by ongoing growth in exports, capital spending and consumption.

South Africa’s young population and location bode well for the long term outlook, even in the face of a slowing birth rate. South Africa has better infrastructure than most other African countries. Moreover, the government has advanced several reforms, including for instance to combat corruption, to promote medium-term growth and fiscal consolidation. But long-standing economic, financial social constraints, including large external imbalances, high public debt, intermittent energy supply, heavy reliance on commodities and high unemployment are all likely to keep growth below 2% per annum in the medium term.

South African per capita income rose strongly during the global commodity price and investment boom in the 2000s. But incomes have fallen steadily in the past decade amid weak GDP growth and record-high unemployment (of 34.9% in the third quarter of 2021). In the longer term, high youth unemployment will remain a significant challenge to addressing economic and social inequalities.