South Africa: 2023 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for South Africa

This 2023 Article IV Consultation highlights that South Africa’s economy is facing mounting economic and social challenges. Growth moderated from 4.9 percent in 2021 to 2.0 percent in 2022 as the country was buffeted by Russia’s war in Ukraine, global monetary policy tightening, severe floods, and an unprecedented energy crisis. Economic and social challenges are building up, and poverty and inequality remain elevated. The near-term priority is to safeguard macro-financial stability in a volatile global environment. Monetary policy normalization should continue as planned, remaining data-dependent, to keep inflation expectations anchored and bring headline inflation back within the target band. In time, refinements in the central bank’s inflation targeting framework would strengthen its ability to guide expectations. Far-reaching reforms are urgently needed to durably lift potential growth, create jobs, and reduce poverty and inequality. Without further such reforms, income per capita is set to continue falling, while rising public debt will leave less room to deal with shocks, including climate shocks, and meet spending needs on social safety nets, health, education, and infrastructure.