• The IMF just cut South Africa’s 2025 growth forecast to a weak 1% – down from Treasury’s rosier 1.9%.
  • That’s bad news when our population is growing faster – at 1.6% a year – meaning we’re actually getting poorer overall.
  • Globally, things aren’t much better: the IMF now expects 2.8% growth in 2025, down from 3.3%.
  • And here’s the kicker: the risk of a global recession has nearly doubled – now sitting at 30%, up from 17% in October.

We’re in what the International Monetary Fund (IMF) is calling a “new era” – and not the hopeful kind. They have sharply downgraded its forecasts for global growth, including a big cut to South Africa’s own economic prospects. The culprit? A fresh wave of protectionist trade policies led by US President Donald Trump’s tariff tirade, along with growing policy uncertainty and already fragile global markets.

The Fund now expects global growth to reach just 2.8% in 2025, down from the 3.3% forecast in January. That may not sound catastrophic at first glance, but it marks a significant decline from the long-term average of 3.7%, which has been maintained since the 2008 financial crisis, especially since the pandemic’s collapse in 2020. And the ripple effects are hitting developing countries like South Africa especially hard.

South Africa’s economic outlook

The IMF’s latest World Economic Outlook, released this week, paints a bleak picture for South Africa’s economy. The country’s 2025 growth forecast has been cut to just 1%, down from 1.5% in January. This is far below the 1.9% predicted by the National Treasury during its March Budget speech.

That means the IMF sees South Africa growing at just over half the rate our government is banking on. And even that meagre 1% is under threat, as the IMF warns its forecast is merely a “reference forecast” – a polite way of saying the whole global picture is too chaotic to predict with confidence.

Looking ahead to 2026, things don’t get much better: growth is now forecast at 1.3%, trimmed down from 1.6%. In fact, the IMF doesn’t expect SA’s economy to exceed 1.8% growth at any point in the next five years. By contrast, South Africa’s population continues to grow at a rate of 1.6% per year, meaning its GDP per capita is effectively shrinking.

What does that mean for you? In simple terms: fewer job opportunities, slower wage growth, and a harder time for small businesses to grow or attract investment. If the economy isn’t growing faster than the population, which it currently isn’t, it becomes harder for families to get ahead – or even stay afloat.

Economists are blunt: South Africans, on average, are getting poorer – even if it doesn’t always show up in your bank balance immediately, it does in how far your money goes. 

The tariff war that changed everything

Much of the current turmoil can be traced back to 2 April, when President Trump gave his so-called “Liberation Day” speech. Flanked by charts showing massive new tariff rates, he announced near-universal tariffs on almost every US trading partner – a move the IMF likens to a reset of the global economic system.

These tariffs now include a 10% blanket duty on all South African exports to the US, with some categories facing a 30% levy. Even though these duties are “paused” for 90 days, the damage is already being done. South Africa sends about 8% of its exports to the US, making it our second-largest trading partner.

“Tariffs constitute a negative supply shock,” the IMF explained. They raise costs, distort investment decisions, and lower productivity.

For South Africa, already reeling from a lower-than-expected 0.6% growth in 2024, the timing couldn’t be worse.

A global slowdown with local consequences

The IMF’s warning goes far beyond South Africa. Tariffs (and the uncertainty they bring) are hitting economies across the board:

  • US growth is expected to drop to 1.8% this year, from a forecast of 2.7% in January – a huge 0.9 percentage point drop.
  • China’s growth is down to 4%, from 4.6% earlier, with IMF chief economist Pierre-Olivier Gourinchas warning the world’s second-largest economy is being dragged down by both tariffs and slowing global demand.
  • Germany is forecast to see 0% growth in 2025 – with the broader euro area averaging just 0.8%.

The IMF says we’re witnessing a global economic “reboot”, with tariffs now at their highest levels in nearly a century.

And the political climate makes recovery harder. Trump’s rhetoric is forcing allies and rivals alike into a tit-for-tat trade war, creating what Gourinchas called “policy-induced uncertainty.”

That uncertainty, the IMF says, is now driving up inflation, dragging down investment, and increasing the risk of recession. The chance of a global recession has jumped to 30%, up from 17% in October.

Why does that matter here at home? Because South Africa trades with the world. When big economies slow down, they buy fewer of our exports, invest less in our markets, and often pull back on development loans or aid. That can mean higher prices on imported goods, fewer jobs tied to exports, and less money flowing into our economy from abroad.

At the start of the year, hopes were high that South Africa’s government of national unity might inject some much-needed reform energy into the economy. 

But now, those hopes are being tempered – not just by the global environment, but by local political instability and sluggish policy implementation. According to the IMF, South Africa’s growth downgrade reflects “deteriorating sentiment due to heightened uncertainty, the intensification of protectionist policies, and a deeper slowdown in major economies.”

The IMF’s regional forecast for sub-Saharan Africa has also been reduced, down 0.4 points to 3.8% in 2025. While the IMF expects a recovery to 4.2% by 2026, the continent’s potential is being undercut by the same trade and financial headwinds affecting global markets.

The IMF also flagged another worry: rising global debt and financial instability. Countries like South Africa, with high public debt and limited fiscal space, are particularly vulnerable.

And it’s not just about government balance sheets. The US now accounts for 55% of the global equity market, up from 30% two decades ago. That dominance means any tremor in Wall Street reverberates globally. 

The path forward: cooperate or collapse?

The IMF’s message is clear: the world needs stability, and it needs it fast. Gourinchas urged global leaders to “restore trade policy stability and forge mutually beneficial arrangements,” warning that continued fragmentation would lower long-term growth and increase the likelihood of “stagflation” – slow growth and high inflation.

For South Africa, this means doubling down on domestic reform and weathering the external storm with eyes wide open. The country is chairing G20 finance meetings this month, putting it at the centre of global discussions. But as Reserve Bank economist Chris Loewald noted, “Countries will come out of the Washington discussions with lessons to be drawn for their own policy.”

The global economic machine that powered decades of growth is stalling. For South Africa, already caught in a decade-long trap of low growth and rising poverty, the IMF’s forecast is another wake-up call.

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