South Africa to Overtake Nigeria as Africa’s Biggest Economy

According to IMF projections, South Africa will momentarily overtake Nigeria and Egypt as the continent’s largest economy next year.

According to the IMF’s World Economic Outlook, South Africa’s GDP would reach $401 billion in 2024, surpassing Nigeria’s $395 billion and Egypt’s $358 billion, both at current prices.

This shift, however, is projected to be temporary, as South Africa is expected to occupy the top rank for only one year before falling behind Nigeria once more. According to the research issued last week, South Africa is expected to tumble to third place behind Egypt by 2026.

While IMF figures show Nigeria’s GDP has surpassed South Africa’s since 2018, its fortunes have dimmed as oil production has declined, and it has been dealing with runaway inflation and a drop in the value of the naira, according to Bloomberg.

Several aspects must be addressed in order to reach the IMF’s predicted GDP growth, including restoring oil output to its capacity, addressing security concerns, and resolving challenges in the electricity sector.

Since entering office as Nigeria’s president, Bola Tinubu has implemented a number of changes, including the elimination of the long-standing and costly gasoline subsidy and the consolidation of all foreign exchange windows, all with the goal of restoring the country’s financial strength.

While these initiatives were largely praised as essential and perhaps beneficial in the long run, they have added to Nigerians’ cost of living. According to the IMF, GDP will grow 3.1% next year, up from 2.9% in 2023.

Egypt, on the other hand, is dealing with its own set of issues, having depreciated its currency three times since early 2022 in response to a foreign exchange crisis. As a result, the Egyptian pound has lost over half its value against the US dollar.

Last year, the Egyptian government received a $3 billion IMF package, which included a condition for a more flexible currency rate. This change is expected to take place after the December elections, in which President Abdel-Fattah El-Sisi seeks to extend his power until 2030.

The deferral has pushed back the IMF reviews, which were initially slated for March and September.

If these investigations are completed, Egypt might have access to $700 million in delayed loan payments, a $1.3 billion resilience fund, and large investments from Gulf countries.

According to the IMF, the adoption of a reform agenda could support economic growth rates of 5% or higher beginning in 2026.

South Africa’s rand, unlike Nigeria’s naira and Egypt’s pound, is free-floating and has lost roughly 10% of its value against the dollar this year.

The IMF expects South Africa’s economy to grow 0.9% this year and 1.8% in 2024, with the potential to grow 2.5% to 3% faster if the country improves its electricity situation, addresses logistic bottlenecks, and implements other reforms.

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