World Bank: S.African economy improved in 2024, GDP growth remains subdued

South Africa's economic landscape has been under the spotlight recently, with assessments and projections from various international organizations. The latest assessment from the World Bank shows a positive outlook for the country's economy in 2025, projecting a growth rate of 1.8%, expected to rise to 2% in the coming years. Lead Economist Jacques Morisset highlighted several factors contributing to this positive trajectory, including political stability under the coalition government, reforms in infrastructure sectors like energy and transport, and controlled inflation by the Reserve Bank of South Africa. However, amidst the positive outlook, Morisset also pointed out significant risks, particularly on the domestic front. He emphasized the need for fiscal consolidation to stabilize public debt, highlighting the importance of addressing infrastructure constraints, energy, and transport bottlenecks to support economic growth. The World Bank's recommendations focus on smart spending, with an emphasis on efficiency and targeting social spending to assist the extreme poor. One of the key points raised in the discussion was the comparison of South Africa's growth rate to that of middle-income countries. While the projected growth is a positive sign for the economy, it falls below the 4.1% growth rate expected for middle-income countries. Morisset acknowledged that more needs to be done to accelerate growth and transition South Africa to a high-income economy. External factors also pose challenges to South Africa's economic outlook, with uncertainties in the global environment affecting financial flows and trade relations with countries like the US. The ever-changing nature of these external dynamics makes projections difficult and highlights the need for proactive measures to mitigate risks. In addressing infrastructure constraints, Morisset emphasized the need to follow successful models from other sectors like civil aviation and telecommunications, where competition has driven efficiency and growth. Opening up the energy sector to competition and attracting private investment in renewable energy have shown promising results, with a significant reduction in load shedding over the past year. The discussion also touched on the importance of human capital development in driving economic growth. While not a new concept, the report underscores the significance of investing in the country's workforce to enhance productivity and competitiveness. Overall, the World Bank's assessment provides a comprehensive analysis of South Africa's economic landscape, highlighting areas of progress and areas that require attention. With a focus on fiscal consolidation, smart spending, and infrastructure development, South Africa has the potential to navigate challenges and achieve sustainable growth in the coming years.