PESA
PESA Editorial on South Africa: 1H2022/23

PESA Editorial on South Africa: 1H2022/23

South Africa’s economy has seen a slow recovery from the shock caused by the COVID-19 pandemic. Real GDP growth is projected to improve from an annual average of -0.5% for 2019 to 2021, to 1.9% in 2022. Inflation is projected to increase from an annual average of 4.0% for 2019 to 2021, to 5.7% in 2022. The elevated inflation is caused by the sanctions against Russia which have increased the price of crucial imports. In the medium-term period from 2023 to 2025, real GDP growth is projected to decrease to an annual average of 1.4%. Meanwhile, inflation is projected to decrease to an average of 4.5% over the medium-term from 2023 to 2025.

PESA Editorial on South Africa: 1H2022/23
PESA Editorial on South Africa: 1H2022/23

The Government of South Africa’s debt been steadily increasing since 2020. South Africa’s gross public debt is projected to increase from an annual average of 65.0% of GDP for 2019 to 2021, to 70.2% of GDP in 2022. The increase in public debt is largely due to slow growth despite the Government of South Africa implementing fiscal austerity as the economy struggles to recover from the shock caused by the global lockdown response to the COVID-19 pandemic. The fiscal deficit is projected to narrow from an annual average of -7.0% of GDP for 2019 to 2021, to -5.8% in 2022. This shows the procyclical fiscal stance taken by the government as spending and further borrowing outpace revenue growth despite reductions in public spending. In the medium-term period from 2023 to 2025, the fiscal deficit is projected to widen to an annual average of -6.6% of GDP. Therefore, public debt is projected to increase to an average of 76.7% of GDP over the medium-term from 2023 to 2025.

PESA Editorial on South Africa: 1H2022/23
PESA Editorial on South Africa: 1H2022/23

South Africa’s external sector was not negatively affected by the COVID-19 pandemic in 2020 but the sector has begun deteriorating despite the rebound in commodity prices, which should have a positive impact on export earnings. The sector’s brief recovery has also been disrupted by the sanctions against Russia, which has raised the price of imports. South Africa’s current account surplus is projected to widen from an annual average of USD 4.0 billion (approx. 1.0% of GDP) for 2019 to 2021, to USD 5.3 billion (approx. 1.3% of GDP) in 2022. In the medium-term period from 2023 to 2025, the current account balance is projected to deteriorate to an annual average of -USD 6.6 billion (approx. -1.4% of GDP). This illustrates a continuous deterioration in the current account balance despite to the current rebound in commodity prices which is primarily driven by the impact of sanctions against Russia. Therefore, South African authorities will have to take a proactive approach to macroeconomic management given the uncertainty of how long the conflict and sanctions will last. The impact of the Russia-Ukraine conflict on capital markets, specifically the withdrawal of capital from emerging markets, will also become a major concern for the balance of payment and the ZAR exchange rate given that South Africa is projected to return to its structural current account deficit.

PESA Editorial on South Africa: 1H2022/23
PESA Editorial on South Africa: 1H2022/23

South Africa is scheduled to hold its national elections in 2024 and the election campaigning cycle is still a long way ahead. Incumbent President H.E. Cyril Ramaphosa will most likely be vying for a second term in office using his anti-corruption rhetoric. The current political climate remains relatively calm despite pressures caused by the slow economic recovery caused by energy supply constraints and public disillusionment with the anti-corruption and ethical renewal rhetoric. President H.E. Cyril Ramaphosa will also seek to play a more meaningful role in resolving security challenges and political tensions in neighbouring states such as Eswatini and Mozambique. These remains the central priorities in South Africa’s regional agenda as a member of SADC and SACU.


Siyaduma Biniza

Siya is the Executive Director at PESA.

Siyaduma Biniza

Advertisement

Advertisement

Advertisement

Advertisement

Advertisement

Follow PESA Online

Advertisement

Follow PESA Online

Follow us on some of your favourite social media.

Contact Us

Please complete the General Enquiry form and submit it to us for a response. Please use the subject “Media” for all media-related requests.

 

    By continuing to use the site, you agree to the use of cookies. Click here for more information.

    The cookie settings on this website are set to "allow cookies" to give you the best browsing experience possible. If you continue to use this website without changing your cookie settings or you click "Accept" below then you are consenting to this.

    Close