(Bloomberg) — South Africa is set to briefly overtake Nigeria and Egypt as the continent’s largest economy next year, International Monetary Fund forecasts show.
The IMF’s World Economic Outlook envisions South Africa’s gross domestic product reaching $401 billion based on current prices in 2024, compared with Nigeria’s $395 billion and Egypt’s $358 billion. Africa’s most industrialized nation is expected to only hold the top spot for a year before it once again lags Nigeria, and then fall to third place behind Egypt in 2026, according to the report, which was released last week.
While IMF data shows Nigeria’s economy has eclipsed South Africa’s since 2018, its fortunes have dimmed along with a decline in production of oil and it has been grappling with runaway inflation and a plunge in the value of the naira.
Bola Tinubu has announced significant policy changes aimed at getting the state’s finances back on track since he became president of the West African nation at the end of May, including revamping the foreign-exchange system, scrapping costly gasoline subsidies and taking steps to address dollar shortages and boost tax revenue.
Those measures are causing initial pain in Africa’s most populous nation, but are expected to increasingly pay dividends going forward. The IMF sees GDP expanding 3.1% next year, compared with 2.9% in 2023.
The reforms should lead to “stronger and more inclusive growth,” Daniel Leigh, division chief in the IMF’s research department, told reporters at the fund’s annual meetings in Marrakech, Morocco, last week.
What Bloomberg Economics Says…
““We believe the IMF’s projections reflects where it believes meaningful reforms will take place. 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 realise the GDP expansion projected by the IMF, we think oil output must be restored to its potential; insecurity needs tackled; and the bottlenecks in the power sector addressed.”
— Yvonne Mhango, Africa economist
Egypt has devalued its currency three times since early 2022 as it confronts a foreign-exchange crunch, with the pound losing almost half its value against the dollar.
The government secured a $3 billion IMF package last year that requires a more flexible exchange rate, a move it’s only likely to undertake after December elections in which President Abdel-Fattah El-Sisi is seeking to extend his rule until 2030.
The delay has stalled IMF reviews that were initially scheduled for March and September. Successful appraisals could unlock about $700 million in postponed loan tranches, give Egypt access to a $1.3 billion resilience fund and potentially spur major Gulf investments.
The government is meanwhile in talks with the IMF on boosting its rescue package to more than $5 billion, according to people familiar with the discussions, confident it can overcome the hurdles preventing it from accessing support, including addressing concerns over its currency policy. The implementation of a reform agenda could underpin an economic growth rate of 5% or more from 2026, according to the IMF.
Read More: Egypt Seeks to Boost IMF Loan Over $5 Billion Amid Currency Woes
Unlike Nigeria’s naira and Egypt’s pound, South Africa’s rand is free floating, and has lost about 10% of its value against the dollar this year.
Currency weakness has been stoked by concerns that the National Treasury will miss its budget deficit and debt-to-GDP targets for the fiscal year through March due to increased demands on the state for support and revenue shortfalls, as a fraying transport network and record power cuts curtail economic growth.
The IMF sees South Africa’s economy expanding 0.9% this year and 1.8% in 2024, with the potential to expand 2.5% to 3% faster should it improve the power situation, tackle logistic bottlenecks and institute other reforms.
Read More: South Africa Set for Growth Take-off With Reforms, IMF Says
OTTAWA – Finance Minister Chrystia Freeland says the government is making some changes to mortgage rules to help more Canadians to purchase their first home.
She says the changes will come into force in December and better reflect the housing market.
The price cap for insured mortgages will be boosted for the first time since 2012, moving to $1.5 million from $1 million, to allow more people to qualify for a mortgage with less than a 20 per cent down payment.
The government will also expand its 30-year mortgage amortization to include first-time homebuyers buying any type of home, as well as anybody buying a newly built home.
On Aug. 1 eligibility for the 30-year amortization was changed to include first-time buyers purchasing a newly-built home.
Justice Minister Arif Virani is also releasing drafts for a bill of rights for renters as well as one for homebuyers, both of which the government promised five months ago.
Virani says the government intends to work with provinces to prevent practices like renovictions, where landowners evict tenants and make minimal renovations and then seek higher rents.
The government touts today’s announced measures as the “boldest mortgage reforms in decades,” and it comes after a year of criticism over high housing costs.
The Liberals have been slumping in the polls for months, including among younger adults who say not being able to afford a house is one of their key concerns.
This report by The Canadian Press was first published Sept. 16, 2024.
OTTAWA – Statistics Canada says manufacturing sales rose 1.4 per cent to $71 billion in July, helped by higher sales in the petroleum and coal and chemical product subsectors.
The increase followed a 1.7 per cent decrease in June.
The agency says sales in the petroleum and coal product subsector gained 6.7 per cent to total $8.6 billion in July as most refineries sold more, helped by higher prices and demand.
Chemical product sales rose 5.3 per cent to $5.6 billion in July, boosted by increased sales of pharmaceutical and medicine products.
Sales of wood products fell 4.8 per cent for the month to $2.9 billion, the lowest level since May 2023.
In constant dollar terms, overall manufacturing sales rose 0.9 per cent in July.
This report by The Canadian Press was first published Sept. 16, 2024.
TORONTO – Strength in the base metal and technology sectors helped Canada’s main stock index gain almost 100 points on Friday, while U.S. stock markets climbed to their best week of the year.
“It’s been almost a complete opposite or retracement of what we saw last week,” said Philip Petursson, chief investment strategist at IG Wealth Management.
In New York, the Dow Jones industrial average was up 297.01 points at 41,393.78. The S&P 500 index was up 30.26 points at 5,626.02, while the Nasdaq composite was up 114.30 points at 17,683.98.
The S&P/TSX composite index closed up 93.51 points at 23,568.65.
While last week saw a “healthy” pullback on weaker economic data, this week investors appeared to be buying the dip and hoping the central bank “comes to the rescue,” said Petursson.
Next week, the U.S. Federal Reserve is widely expected to cut its key interest rate for the first time in several years after it significantly hiked it to fight inflation.
But the magnitude of that first cut has been the subject of debate, and the market appears split on whether the cut will be a quarter of a percentage point or a larger half-point reduction.
Petursson thinks it’s clear the smaller cut is coming. Economic data recently hasn’t been great, but it hasn’t been that bad either, he said — and inflation may have come down significantly, but it’s not defeated just yet.
“I think they’re going to be very steady,” he said, with one small cut at each of their three decisions scheduled for the rest of 2024, and more into 2025.
“I don’t think there’s a sense of urgency on the part of the Fed that they have to do something immediately.
A larger cut could also send the wrong message to the markets, added Petursson: that the Fed made a mistake in waiting this long to cut, or that it’s seeing concerning signs in the economy.
It would also be “counter to what they’ve signaled,” he said.
More important than the cut — other than the new tone it sets — will be what Fed chair Jerome Powell has to say, according to Petursson.
“That’s going to be more important than the size of the cut itself,” he said.
In Canada, where the central bank has already cut three times, Petursson expects two more before the year is through.
“Here, the labour situation is worse than what we see in the United States,” he said.
The Canadian dollar traded for 73.61 cents US compared with 73.58 cents US on Thursday.
The October crude oil contract was down 32 cents at US$68.65 per barrel and the October natural gas contract was down five cents at US$2.31 per mmBTU.
The December gold contract was up US$30.10 at US$2,610.70 an ounce and the December copper contract was up four cents US$4.24 a pound.
— With files from The Associated Press
This report by The Canadian Press was first published Sept. 13, 2024.
