The bad news from the latest assessment by the International Monetary Fund (IMF) of the impact of trade wars and policy uncertainty on the world economy is not unexpected. It nonetheless highlights the extent of the economic damage anticipated by recent unbridled United States of America (US) protectionism and its wider consequences.

In commenting on the latest update by the IMF on the world economic outlook, Prof Raymond Parsons, economist from the North-West University (NWU) Business School, says in cutting its 2025 global growth forecast from 3,3% to 2,8%, the IMF has warned that it nonetheless hides big variations across countries and is universally negative.

“While a global recession is unlikely, the IMF expects both emerging markets and developed economies to experience much slower growth, including the two biggest ones, namely, the US and China. The world economy is therefore clearly now less supportive of domestic economic growth. Moreover, the IMF has two forecasts of particular significance for South Africa’s growth prospects.”

Prof Parsons says the IMF has reduced South Africa’s 2025 gross domestic product (GDP) growth forecast from 1,5% to 1%, but is also projecting South Africa reaching a growth rate of only 1,8% by 2030.

“This is simply not good enough for South Africa, given its socioeconomic challenges. It falls far short of the target of the Government of National Unity (GNU) of wanting 3% inclusive growth in the medium term. High investment and job-rich growth require confidence in the future. There needs to be a renewed emphasis on accelerating key structural reforms.”

Prof Parsons says a strategic pivot in growth policy is urgently required to create the extra economic buffers and resilience needed to decisively deal with external shocks, and to ensure that tailwinds outweigh headwinds in 2025.