Despite economic challenges, including the aftermath of the COVID-19 pandemic and ongoing energy shortages, the country's economy is showing signs of improvement.

A reduction in inflation rates, coupled with the SA Reserve Bank’s expansionary monetary policy, is expected to stimulate growth. The bank’s decision to lower the repo rate is seen as a key factor in aiding economic recovery, providing much-needed relief for businesses and consumers alike.

However, challenges remain.  Sovereign Africa Ratings Chief Operating Officer, Zwelibanzi Maziya highlighted concerns about the country’s growing foreign currency-denominated debt. If this trend continues, SA may face increased external risks, which could impact its credit rating. Furthermore, Maziya pointed to potential risks stemming from ineffective debt management, which could undermine fiscal health and lead to a downgrade.

Another potential risk to the country’s recovery is the possibility of renewed power shortages. Load shedding, which previously disrupted economic activity, remains a concern that could hinder growth if it resurfaces.

Looking forward, Maziya emphasised the importance of stabilising public finances. SA government has made strides in reducing the pace of debt accumulation, with the debt-to-GDP ratio rising by 1.27% between 2023 and 2024, down from 2.6% in the previous period.

--ChannelAfrica--