IN its latest World Economic Outlook Report released this past week, the International Monetary Fund (IMF) cut its global economic growth forecast to 2.8% for year 2025, down from 3.3% forecast last January. Projections for 2026 are down too, from 3.3% in IMF’s January 2025 report, to 3.0% in the latest report.
The IMF said that policy uncertainty has increased since January. Pierre-Olivier Gourinchas, the IMF’s chief economist, remarked, “We’re entering a new era as the global economic system that has operated for the last 80 years is being reset.”
The ongoing trade war has heightened the risk of a global recession, with the IMF estimating a 30% likelihood—up from 17% last October. If the global recession does materialize, it will hurt many economies worldwide. As usual, if that recession comes, we can expect governments to intervene with expansionary policies to stimulate economies.
The IMF has downgraded the United States’ (US) growth forecast for 2025 to 1.8%, a sharp drop from 2.8% last year. This is particularly concerning to me, as the US is its second-largest trade partner.
A downturn in the US economy could have dire consequences for South Africa’s already struggling economy. A stronger US economy is good for South Africa.
South Africa’s Finance Minister, Enoch Godongwana, projected a 1.9% growth rate for 2025 in his latest national budget—a growth projection I view as a fantasy.
There will be no 1.9% economic growth this year. Anti-growth policies and investor-unfriendly ideologies continue under the Government of National Unity (GNU).
The IMF on Sub-Saharan Africa
On Sub-Saharan Africa, the IMF argues that challenges such as higher global borrowing costs, reduced external funding, declining global demand, lower commodity prices, and increased economic uncertainty, are impeding economic development. The Sub-Saharan Africa 2025 growth projection has been revised downwards, to 3.8% from 4.2% last January.
Trade tensions could further dampen Sub-Saharan Africa’s confidence and activity, while raising borrowing costs, the IMF wrote.
The IMF has cut its growth projection for South Africa to 1%, from 1.5% growth it projected last January. They have done this due to the global environment that has become uncertain as the trade war rages on.
Even if there was no trade war, I wouldn’t have projected more than 1% growth in 2025. The domestic environment remains bad in South Africa, with anti-growth policies continuing under the GNU.
Senegal is expected to lead the Sub-Saharan Africa region with an impressive 8.4% growth rate in 2025, while Botswana will contract by -0.4%, Equatorial Guinea by -4.2%, and South Sudan by -4.3%. There’s no data for Eritrea.
The impact of US tariffs on South Africa
US President Donald Trump has temporarily paused tariffs above 10% on many US trade partners, including South Africa, which had been subjected to a 30% tariff rate. The 25% tariff rate on cars and steel remains in place.
The global standard of 10% applies to all nations, except for China. The 90-day pause aims to facilitate new trade negotiations, with over 75 countries reportedly seeking discussions with the US administration.
While South Africa’s mineral exports—such as gold and platinum—are excluded from tariffs, industries like automotive and agriculture are expected to suffer. The loss of duty-free access under the African Growth & Opportunity Act (AGOA) will significantly impact South Africa’s automotive sector.
According to Goldman Sachs, exports to the US accounted for over 2% of South Africa’s Gross Domestic Product (GDP) in 2024.
Citrus farms, which contribute over $100 million annually to exports, are also likely to be affected, with 35,000 jobs at risk.
Citrusdal, a key citrus-producing town in the Western Cape province, is among those expected to bear the brunt of these tariffs.
During President Volodymyr Zelensky’s state visit to Pretoria this past week, President Cyril Ramaphosa announced plans for upcoming discussions with President Donald Trump. Both Trump and Ramaphosa have expressed a shared commitment to strengthening US-South Africa relations—a promising development.
A new trade deal between South Africa and the United States is essential. Prompt negotiations between Presidents Trump and Ramaphosa would benefit South Africa significantly. Such an agreement could eliminate tariffs and pave the way for mutually beneficial trade relations. PM
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By Phumlani Majozi – political economist, global speaker & author of a book titled “Lessons from Past Heroes”. Check Majozi’s YouTube channel.
