South Africa is one of the largest and most developed economies on the African continent. The country is rich with natural resources and other minerals. Mining is an important part of the economy of South Africa.
In recent years, South Africa has shown a rather modest growth rate, due to the extremely high level of socio-economic inequality, the volatility of the industrial sector, as well as the energy crisis and aging infrastructure.
As a result of the COVID-19 pandemic, the South African economy shrank by 6.0% in 2020, but in 2021 the rate of recovery of real GDP was 4.7%, which is the highest growth rate since 2007. However, this result was achieved mainly due to the effect of deferred demand, and in 2022 the pace of development returned to a more conservative indicator of 1.9%. The recession caused by the pandemic has exacerbated the country's socio-economic problems. Despite the fact that GDP figures have recovered after 2020, the country remains extremely high in unemployment, especially among women and youth. In addition, 2022 was a record year for the number of recorded power outages, which indicates an aggravation of the energy crisis in South Africa, which has been ongoing since 2007.
In addition, in 2022, significant economic damage was caused as a result of floods in Kwazulu-Natal province, which ranks second in terms of contribution to South Africa's GDP.
According to the IMF, the real GDP growth rate of South Africa in 2023 will be 0.9%. The African Development Bank (AfDB) and Oxford Economics also expect low economic growth rates of 0.2%. The slowdown in growth is due to the ongoing energy crisis and the instability of the foreign trade environment, which reduces demand for South African exports.
In turn, the country's internal socio-economic problems may require additional costs from the government, which will increase pressure on the South African financial sector. In the medium term, the growth rate of real GDP will increase, but will remain below the level necessary to ensure the stable development of the country.
GDP by PPP per capita in South Africa in 2022 amounted to $15,728.5, and by 2028, according to IMF forecasts, it will reach $17,880.6, demonstrating an average annual growth rate of 2.0% in 2023-2028.
Inflation in 2022 was 6.9%, exceeding the targets of the South African Reserve Bank (SARB). The increase in inflationary pressure is due to both internal and external factors. The main reasons for the increase in inflation include disruptions in logistics, the depreciation of the national currency and the global rise in energy and food prices. The high inflation rate in 2023 is expected to lead to further tightening of the monetary policy of the South African Reserve Bank. However, in the medium term, inflationary pressure will decrease against the background of stabilization of food and energy prices.
An increase in the interest rate will also help to reduce inflation. According to the IMF forecast, inflation in South Africa will fall to 4.8% in 2024, while Oxford Economics expects the indicator to be at 5.1%.
