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Wednesday, December 6, 2023

South Africa to Briefly Eclipse Nigeria to Become Africa’s Biggest Economy

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South Africa is set to briefly overtake Nigeria and Egypt as the continent’s largest economy next year, International Monetary Fund forecasts show.

The IMF’s World Economic Outlook envisions South Africa’s gross domestic product reaching $401 billion based on current prices in 2024, compared with Nigeria’s $395 billion and Egypt’s $358 billion.

Africa’s most industrialized nation is expected to only hold the top spot for a year before it once again lags Nigeria, and then fall to third place behind Egypt in 2026, according to the report, which was released last week.

While IMF data shows Nigeria’s economy has eclipsed South Africa’s since 2018, its fortunes have dimmed along with a decline in production of oil and it has been grappling with runaway inflation and a plunge in the value of the naira.

Bola Tinubu has announced significant policy changes aimed at getting the state’s finances back on track since he became president of the West African nation at the end of May, including revamping the foreign-exchange system, scrapping costly gasoline subsidies and taking steps to address dollar shortages and boost tax revenue.

Those measures are causing initial pain in Africa’s most populous nation, but are expected to increasingly pay dividends going forward. The IMF sees GDP expanding 3.1% next year, compared with 2.9% in 2023.

The reforms should lead to “stronger and more inclusive growth,” Daniel Leigh, division chief in the IMF’s research department, told reporters at the fund’s annual meetings in Marrakech, Morocco, last week.

The IMF sees South Africa’s economy expanding 0.9% this year and 1.8% in 2024, with the potential to expand 2.5% to 3% faster should it improve the power situation, tackle logistic bottlenecks and institute other reforms.

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