The International Monetary Fund (IMF) forecasts that South Africa will briefly surpass Nigeria and Egypt to become Africa’s largest economy in 2024.
The IMF’s latest World Economic Outlook (WEO) projects South Africa’s Gross Domestic Product (GDP) to reach $401 billion at current prices in 2024, outpacing Nigeria’s $395 billion and Egypt’s $358 billion.
However, the IMF report notes that South Africa is expected to only hold the top spot for a year before it once again loses it to Nigeria, and then fall to third place behind Egypt in 2026.
Although IMF data indicates that Nigeria’s economy surpassed South Africa’s in 2018, the country has faced significant economic challenges due to declining oil production, high inflation, and a devaluation of the naira.
President Bola Tinubu, who took office at the end of May, has unveiled substantial policy reforms with the goal of stabilizing the country’s finances. These reforms include restructuring the foreign-exchange system, eliminating expensive fuel subsidies, addressing currency shortages, and enhancing tax revenue.
The IMF said that while those measures are causing initial hardship among Nigerians, they were expected to increasingly pay dividends going forward.
The IMF anticipates that Nigeria’s GDP will grow by 3.1% next year, compared to 2.9% in 2023. For South Africa, the IMF projects a 0.9% growth rate in 2023 and 1.8% in 2024, with the potential to increase by 2.5% to 3% should the country address power issues, logistics challenges, and implement other reforms.
Regarding Egypt, the IMF observed that the North African nation has devalued its currency three times since early 2022 due to foreign-exchange difficulties, leading to the pound losing nearly half of its value against the dollar.
The Egyptian government, seeking to extend President Abdel-Fattah El-Sisi’s rule until 2030, obtained a $3 billion IMF package last year. This package entails a more flexible exchange rate, which is expected to be implemented after the December elections.
This delay has caused delays in the IMF’s review process, originally planned for March and September. Successful evaluations could unlock around $700 million in delayed loan installments, provide Egypt access to a $1.3 billion resilience fund, and potentially attract significant Gulf investments.
The IMF suggests that implementing a reform agenda could lead to Egypt achieving an economic growth rate of five percent or more starting in 2026. Africa economist Yvonne Mhango, in response to the IMF’s Africa forecast, stated, “We believe the IMF’s projections reflect its expectations for substantial reforms.”
“South Africa’s transient emergence as Africa’s largest economy in 2024 is mainly due to the shrinking of Nigeria and Egypt’s GDP in dollar terms, following sharp currency devaluations. However, the long-term trajectory shows Nigeria and Egypt regaining their top spots, with the former taking a strong lead.
“For Nigeria to realize the GDP expansion projected by the IMF, we think oil output must be restored to its potential; insecurity needs to be tackled; and the bottlenecks in the power sector addressed.”