South Africa’s gradual structural reforms are helping to revive segments of the economy but remain inadequate to achieve the government’s 3.5% growth target, according to Moody’s Ratings.
Africa’s most industrialised nation has faced persistent economic stagnation for over a decade, growing by less than 1% annually amid deteriorating infrastructure, chronic power outages, logistics constraints, widespread crime, and corruption, Bloomberg reported.
Following last year’s elections, the coalition government formed after the African National Congress lost its parliamentary majority has made economic reforms a key priority, targeting growth of up to 3.5% by 2030.
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However, Moody’s remains cautious about the pace and impact of these efforts.
“We don’t see in our baseline that the current reform progress to date, and our expectation of how reforms will progress, will be sufficient to raise economic potential beyond 2%,” said Evan Wohlmann, Vice President – Senior Credit Officer at Moody’s, during an online briefing on Tuesday.
A study by Investec Wealth & Investment International found that South Africa’s economy is roughly 37% smaller than it would have been if it had kept pace with other emerging markets and maintained an average annual growth rate of 4.5% since 2010.
Moody’s projects that South Africa’s economy will grow by 1% in 2025 and 1.6% in 2026.
Wohlmann added that the slow recovery is likely to continue weighing on the government’s fiscal management and broader economic stability.
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Image Credit: Reuters
