The International Monetary Fund (IMF) has disclosed in its forecast that South Africa may topple Nigeria as Africa’s biggest economy.
According to the IMF World Economic Outlook, South Africa, the most industrialized country on the African continent, is reaching toward achieving $401 gross domestic product (GDP) in 2024.
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The global financial institution, however, envisioned that, based on current prices, Nigeria and Egypt have GDPs of $395 billion and $358 billion, respectively.
The IMF further noted that South Africa is billed to top the chart for a year before it once again trails Nigeria, the most populated African nation.
It said South Africa may further plummet to third place behind Egypt in 2026, according to the report, which was released last week.
This is coming as Nigerian President Bola Tinubu has made some significant policy changes, coupled with a decline in the production of oil, compelling Nigerians to grapple with inflation and a plunge in the value of the naira.
Tinubu’s administration’s efforts to revamp the economy have affected the removal of fuel subsidies and the foreign exchange system, taking steps to address dollar shortages and boost tax revenue.
Those measures are causing initial pain in Nigeria 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.
According to Bloomberg, Nigeria and Egypt have embarked on vital economic policies that will bring them back to the top in the near future.
“We believe the IMF’s projections reflect 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 realize 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,” Bloomberg said.