South Africa returns to pre-pandemic economic growth levels


South Africa is returning to pre-Covid-19 economic growth levels, according to the latest KPMG Global Economic Outlook report.

The global economic research and consultancy firm said on September 29 that South Africa remains in a unique position where many of its natural resource exports mirror those of Russia – such as palladium and other metals. platinum group, gold, iron ore and coal, as well as many other industrial metals.

Consequently, the country has benefited from the rise in commodity prices initially caused by Covid-19 and now by the conflict in Ukraine. The result of rising commodity prices has been an improvement in South Africa’s terms of trade, which has led to surpluses in its current account since 2020.

KPMG said South Africa’s gross domestic product (GDP) is expected to grow by around 1.8% this year, driven by contributions from the finance, real estate and business services sector, the growth of personal services as well as mining, agriculture and trade, catering. and accommodation.

The growth projected for this year, however, would be materially lower than that achieved in 2021. KPMG said it should be understood that much of this growth was due to technical base effects following the sharp contraction induced by Covid- 19 in 2020.

Meanwhile, growth in 2023 is expected to decline further to 1.5%, with higher interest rates and weaker global growth reducing aggregate demand locally.

In 2024, economic growth is expected to converge to the pre-Covid-19 average level of around 1.7%, as inflationary pressures ease and global growth rates improve.

Despite its growth, KPMG noted that South Africa still had to deal with inflationary implications resulting directly from the Covid-19 pandemic and Russia’s invasion of Ukraine.

Moreover, interest rates continue to rise and, as in the rest of the world, growth prospects are diminishing accordingly.

Overall, growing geopolitical uncertainty and inflationary pressures are expected to weigh on global economic growth projections, KPMG warned.

The company predicted global GDP growth of 1.9% in 2023, up from 2.7% this year, as the world grapples with a host of economic and political challenges. Weaker growth could lead to moderate inflation at 4.7% in 2023 after averaging 7.6% this year.

The report warns that a pick-up in inflation is putting pressure on household finances and corporate margins, while leading central banks to aggressively tighten monetary policy, with recession once again on the horizon in many savings.

Rising costs are weighing on consumers, with the cost of living crisis putting a considerable strain on household purchasing power. Consumer confidence has taken a hit in most economies and spending is following suit, leading to weaker overall economic growth.

“The need for fiscal support is likely to fuel inflation further over the medium term, placing fiscal policy actions at odds with central banks’ objectives in fulfilling their mandates,” said the chief economist of KPMG.Ael Selfin said.

He said the company’s latest forecast suggested tighter monetary policy would moderate inflation, but inflationary pressures were likely to linger longer, so central banks were likely to be more “hawkish” in their response. to what could be a relatively short period. burst into inflation.

“A very aggressive cycle of monetary tightening across the globe could impose heavy costs on the global economy as it emerges from another synchronized shock. Other policy tools and further reforms to open up supply could be deployed to ease the burden on central banks,” he said.


Although inflationary pressures were already present as Covid economies reopened, Russia’s invasion of Ukraine added further pressure, with a range of products exported by the region seeing their prices rise significantly, said KPMG.

More recently, some prices have moderated somewhat and supply has adjusted as demand slows as the economy slows.

Energy prices have been at the center of the inflationary push, although oil prices have moderated recently, which has recently contributed to a slight easing of annual inflation figures in many countries.

Nevertheless, KPMG said the price of gas in many regions remains heavily impacted by the conflict in Ukraine, with the rush to secure liquefied natural gas (LNG) shipments for the winter causing a recent spike in gas prices not only in Europe but also in Asia.

It is not yet certain that the gas supply will be sufficient during the winter months. This could be a blow to the short-term prospects of some European economies that are more dependent on Russian supplies.


The combination of supply chain bottlenecks, generous government spending, tight labor markets and a commodity shock triggered by Russia’s invasion of Ukraine has caused the inflation well above central banks’ target in many developed economies.

KPMG’s Global Economic Outlook expects inflation to moderate significantly from the middle of next year, with the energy shock no longer factored into the calculation of year-on-year inflation.

However, the world could enter a structurally more inflationary environment, as production costs – from materials to energy and labor – remain high.

Faced with inflation well above target, an immediate concern for most central banks is that inflation expectations will remain high, while their inflation-fighting credibility is lost. That’s why central banks are likely to be more hawkish in their response to what could be a relatively short-lived inflation spurt, with markets pricing in aggressive rate hikes over the coming months, KMPG said.

Moreover, if inflationary pressures are to entrench, interest rates could remain at levels higher than those seen over the past decade, even after the current inflation spike subsides. This would represent a significant change in monetary policy in a relatively short period of time.


With the easing of Covid-19 restrictions across the majority of the world, there was cautious optimism for a post-pandemic international rebound, but KPMG analysis reveals the economic recovery has been uneven and relatively short-lived before new challenges, including supply chain issues and subsequently the war in Ukraine, began.

“It is difficult to downplay the scale of the geopolitical and economic uncertainty that each of us faces – from individual households to governments and business leaders. We entered the year with some cautious optimism as Covid-19 restrictions were gradually eased, but what followed was a series of challenges that tested the resilience of even the most robust and most durable,” said KPMG’s global head of clients and markets. Mayor of Regina said.

KPMG noted that there are also fears of a potential spike in cases during the northern hemisphere winter months, which could see some restrictions return, leading to further disruption to production and production. economic – especially in China, which continues to implement a zero-Covid-19 policy.

An increase in the number of cases could also lead to a tightening of the labor market and increased pressure on health services, as well as an additional burden on public finances.

“The international outlook is uneven. Some countries, regions and territories have achieved a strong post-pandemic rebound, for others chronic political and economic challenges have shaken hopes of regaining lost ground. It’s a similar story across all areas of analysis – with different perspectives and outcomes in different areas,” the mayor said.

She said, however, that there were a number of universally consistent themes and stories.

“The rapid return to economic activity post-Covid-19 has created supply chain issues that appear to be easing slightly but continue to depress growth projections. Combined with the devastating war in Ukraine, the sequels C are struggling with shortages in everything from oil and gas to wheat and microchips. This has had a significant impact on inflation and recession fears,” the mayor said.

KPMG’s Global Economic Outlook provides semi-annual economic forecasts, produced by macro teams across KPMG’s global network using a suite of external and internal models capturing the key interrelationships of the global economy.


About Author

Comments are closed.