The World Bank has revised its economic growth forecast for South Africa, projecting the country’s GDP to increase by 1.8% in 2025, up from an earlier estimate of 1.3%.
The Bank further expects the economy to expand to 2% by 2027.
This optimistic outlook was revealed in its South Africa Economic Update report, released on Tuesday.
The Washington-based institution attributed the upward revision to a sustained recovery in the energy sector, as well as improvements in the logistics sector amid ongoing structural reforms.
The Bank added that the modest recovery is expected to be driven by infrastructure services and favorable external factors.
“Such recovery, albeit modest, will be driven by improved infrastructure services and a relatively favourable external environment. During this period, inflation is expected to remain under control, allowing a further easing of monetary policy that will encourage banks’ credits to businesses and households and, thus, stimulate economic growth.”
South Africa’s energy sector, in particular, has shown signs of stabilization, contributing to the country’s positive economic trajectory.
The nation has faced significant challenges in recent years, including energy supply constraints and infrastructure bottlenecks.
However, recent reforms and investments in the energy sector are beginning to yield positive results. The government’s efforts to enhance energy production and distribution have been pivotal in this recovery.
Deputy President Paul Mashatile emphasized the importance of private sector involvement in driving economic growth.
“Privatisation is not a ‘swear word’. Involving the private sector is crucial for funding areas like energy, water, and infrastructure due to limited public funds.”
The World Bank’s report also cautioned that while the outlook is positive, challenges remain.
Achieving a growth rate substantial enough to alleviate poverty and unemployment will require sustained efforts in implementing reforms and attracting investments. The institution warned that the country may struggle to achieve a growth rate significant enough to make a lasting impact on these issues.
The recovery of South Africa’s energy sector is expected to have a ripple effect on other industries, fostering job creation and enhancing overall economic stability.
South African state-owned power utility company, Eskom, says it projects to return to profit making next year for the first time in eight years after suffering a whooping $3 billion loss.
