The world is entering a new economic era that will mean higher inflation and lower economic growth for the whole globe.
The International Monetary Fund;s (IMF) latest economic outlook has bad news for South Africa thanks to the Trump tariffs, revising economic growth for the country to only 1% in 2025 and 1.3% in 2026. The outlook for the rest of the world is also not great, with the IMF cutting it to only 2.8%, far below its long term average of 3.7%.
IMF launched its April 2025 World Economic Outlook, “Policy Uncertainty Tests Global Resilience, today and it paints a grim picture of global economic growth for the near future.
The latest forecast is 0.5% lower for the global economy as well as the South African economy compared to IMF’s outlook in January. These are reference forecasts due to the current complexity, and fluidity and are based on the US tariffs announced on 2 April and some of its trading partners’ counter measures.
An alternative forecast after the tariffs were paused for 90 days still estimates global economic growth at only 2.8% for 2025, while global inflation is expected to be 0.1% higher in 2025 and 2026.
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Resetting of whole global economic system
Pierre-Olivier Gourinchas, economic counsellor and director of research at IMF, says in his blog that the global economic system most countries operated under for the last 80 years is being reset, ushering the world into a new era.
“Existing rules are challenged while new ones are yet to emerge. Since late January, a flurry of tariff announcements by the United States, which started with Canada, China, Mexico and critical sectors, culminated with near universal levies on 2 April.
“The US effective tariff rate surged past levels reached during the Great Depression while counter-responses from major trading partners significantly pushed up the global rate. The resulting epistemic uncertainty and policy unpredictability is a major driver of the economic outlook.
“If sustained, this abrupt increase in tariffs and attendant uncertainty will significantly slow global growth. Reflecting the complexity and fluidity of the moment, our report presents a range of forecasts for the global economy.”
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SA economic growth already weaker than expected in 2024 out-turn
The IMF says its downward revision for economic growth in South Africa is based on “slowing momentum from a weaker than expected 2024 out-turn, deteriorating sentiment due to heightened uncertainty, the intensification of protectionist policies and a deeper slowdown in major economies”.
On Friday, the IMF will launch its report for Sub-Saharan Africa that will give more detail on South Africa after it revised its forecast for the region down by 0.4% to 3.8% for 2025, down from 4% in 2024, although its 2026 forecast for Sub-Saharan Africa remained unchanged at 4.2%.
