South Africa (Commonwealth) _ South Africa is set to supersede Nigeria and Egypt being the largest economy in entire African region in 2024, the international monetary Fund predicted. In compared to Nigeria’s GDP of $395 billion and Egypt’s GDP of $358 billion, the IMF predicts that South Africa’s gross domestic product would reach $401 billion in 2024 in line with current prices.
According to the survey, which was published last week, the most industrialized country in Africa is predicted to only keep the top rank for a year before falling behind Nigeria once more and then dropping to third place behind Egypt in 2026.
Nigeria’s economy has surpassed that of South Africa since 2018, according to IMF data, but its fortunes have since deteriorated due to a fall in oil production, runaway inflation, and a decline in the value of the naira.
Since taking office as president of the West African country at the end of May, Bola Tinubu has made a number of significant policy announcements aimed at restoring the state’s finances, including overhauling the foreign exchange system, eliminating pricey gasoline subsidies, and taking actions to address dollar shortages and increase tax revenue.
Although those actions are initially painful for the most populous country in Africa, they are anticipated to pay off in the long run. According to the IMF, GDP will grow 3.1% in 2019 as opposed to 2.9% in 2023.
According to Daniel Leigh, division leader in the IMF’s research department, the reforms should result in “stronger and more inclusive growth,” he told reporters last week in Marrakech, Morocco, at the fund’s annual meetings. The IMF’s estimates, according to economists, show where they anticipate significant reforms to occur. In 2024, South Africa would briefly surpass Nigeria as the largest economy in Africa, largely as a result of Nigeria’s and Egypt’s GDPs declining in dollar terms as a result of severe currency devaluations.
The long-term trend, however, indicates that Nigeria and Egypt will reclaim the top rankings, with the former taking a commanding lead. We believe that in order for Nigeria to see the GDP growth predicted by the IMF, oil production needs to be restored to its capacity, insecurity needs to be addressed, and the power sector’s problems resolved.
Egypt has depreciated its currency three times since the beginning of 2022 as it deals with a foreign exchange crisis, with the pound losing over half its value against the dollar, according to Africa economist Yvonne Mhango.
A more flexible currency rate is an integral component of the government’s $3 billion IMF package last year. This reform is unlikely to occur until after the December elections, in which President Abdel-Fattah El-Sisi is seeking to extend his reign until 2030.
The delay has hindered IMF reviews that were initially slated for March and September. Successful appraisals could allow Egypt access to a $1.3 billion resilience fund, release about $700 million in delayed loan tranches, and possibly encourage significant Gulf investments. According to people familiar with the discussions, the government is in talks with the IMF about increasing its rescue package to more than $5 billion. The government is confident that it can clear the barriers preventing it from receiving support, including addressing concerns about its currency policy. According to the IMF, the implementation of a reform agenda could support economic growth of at least 5% starting in 2026.
South Africa’s rand, unlike Nigeria’s naira and Egypt’s pound, is free floating and has lost about 10% of its value against the dollar this year. Currency weakness has been exacerbated by fears that the National Treasury will miss its fiscal year-to-March budget deficit and debt-to-GDP targets due to increased demands on the state for assistance.
