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IOL News
12 hours ago
- Business
- IOL News
AfDB slashes SA's growth forecast by half amid structural challenges, trade war concerns
The bank said priority actions should include enhancing governance and operational efficiency of State-Owned Enterprises, particularly of Eskom and rail, ports and pipelines operator Transnet, to restore service reliability and unlock growth. Image: Leon Lestrade/ Independent Newspapers The African Development Bank (AfDB) has drastically cut South Africa's gross domestic product (GDP) forecast for 2025 below 1%, saying that the economy continued to be weighed down by a range of structural constraints and could take a hit from Trump's trade war. In its Country Focus Report for South Africa published on Wednesday, the AfDB lowered its forecast for Africa's most-industrialised economy to a meager 0.8% this year from a previous estimate of 1.6%. This forecast by the AfDB is more pessimistic than the National Treasury's growth forecast of 1.4% for the year, which was revised down from a prior 1.9% on the back of geopolitical tensions including Trump's trade levies. It is also less than the South African Reserve Bank's latest projection of 1.2% this year amid declining mining and manufacturing output and rising unemployment, though it is expected to rise to 1.8% by 2027. S&P Global also recently lowered its 2025 GDP growth projection for South Africa to 1.1% from 1.3% previously due to weaker-than-expected GDP print for the first quarter. AfDB country economist Akhona Peter said South Africa's economy was vulnerable to external shocks particularly from the United States, its second largest export destination after China. Video Player is loading. Play Video Play Unmute Current Time 0:00 / Duration -:- Loaded : 0% Stream Type LIVE Seek to live, currently behind live LIVE Remaining Time - 0:00 This is a modal window. Beginning of dialog window. Escape will cancel and close the window. Text Color White Black Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Background Color Black White Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Transparent Window Color Black White Red Green Blue Yellow Magenta Cyan Transparency Transparent Semi-Transparent Opaque Font Size 50% 75% 100% 125% 150% 175% 200% 300% 400% Text Edge Style None Raised Depressed Uniform Dropshadow Font Family Proportional Sans-Serif Monospace Sans-Serif Proportional Serif Monospace Serif Casual Script Small Caps Reset restore all settings to the default values Done Close Modal Dialog End of dialog window. Advertisement Next Stay Close ✕ The Trump administration is expected to implement its hefty 31 import tariffs on a number of exporting countries next week, including South Africa, which exports a variety of minerals and commodities to the US. US President Donald Trump said on Wednesday that he was not considering delaying implementing the tariffs again after he temporarily suspended them for 90 days in April. 'This is mainly on the fact that we expect trade tensions to pretty much affect net exports negatively,' Peter said. 'Industries such as agriculture, which rely heavily on US market access, will be particularly vulnerable. In the short-term, this could slow economic activity, decrease firm profitability, and constrain job creation in export-linked industries.' The South African government is keen to ensure that the new requirements by the US do not unduly disadvantage local enterprises, hence the appeal for strategic patience from the South African industry. South Africa's proposed Framework Deal, which was submitted to the US Trade Representative in May, aims to tackle a range of US concerns including non-tariff barriers and longstanding market access issues. It seeks specific exemptions from Sections 232 duties for key export products such as automobiles, auto parts, steel, and aluminium, ensuring these critical sectors can remain competitive in the US market. Meanwhile, the AfDB recommended that the South African government should accelerate structural reforms to offset global challenges. The bank said priority actions should include enhancing governance and operational efficiency of State-Owned Enterprises, particularly of Eskom and rail, ports and pipelines operator Transnet, to restore service reliability and unlock growth. It also called for strengthening local government capacity, addressing spatial inequality, advancing digital government, promoting public-private partnerships (PPPs), and reducing wasteful expenditure through fiscal consolidation are also essential to improve service delivery and public trust. 'To accelerate domestic capital mobilization, reforms must focus on improving governance, enhancing institutional effectiveness, and fostering transparency and accountability. At the same time, promoting industrialization, deepening trade and investment, and building a competitive export base can drive higher growth and employment,' recommended the report. 'Tackling youth unemployment requires focused skills development and capacity building initiatives, aligned with labor market demands, to take full advantage of the country's human capital. 'Trade needs to be diversified under AfCFTA and into new Asian markets. Lastly, improving the business environment by cutting red tape, ensuring fair market access for Small and Medium Enterprises (SMEs), and increasing labor market flexibility will support entrepreneurship, firm growth, and job creation — essential ingredients for sustainable economic transformation.' BUSINESS REPORT
Zawya
6 days ago
- Business
- Zawya
AfDB projects Nigeria's GDP growth to moderate to 3.2% in 2025
The African Development Bank (AfDB) has projected Nigeria's real Gross Domestic Product (GDP) growth to moderate to 3.2 percent in 2025 and 3.1 percent in 2026, down from 3.4 percent in 2024, largely due to persistent structural bottlenecks and heightened global uncertainty. The AfDB urged Nigeria to adopt a more strategic and coordinated approach to capital mobilisation as the country advances its economic reform agenda. This is contained in the recently launched 2025 Nigeria Country Focus Report (CFR), titled 'Making Nigeria's Capital Work Better for Its Development'. The report highlights the urgent need to improve how Nigeria mobilises, manages, and invests all forms of capital: fiscal, financial, human, natural, and business capital to accelerate structural transformation and foster inclusive growth. The launch comes amid Nigeria's bold economic reforms, including the removal of fuel subsidies, unification of exchange rates, and tax reforms. These measures reflect the government's commitment to long-term macroeconomic stability and self-reliant development. 'Despite this momentum, the report projects that real GDP growth will moderate to 3.2 percent in 2025 and 3.1 percent in 2026, down from 3.4 percent in 2024, largely due to persistent structural bottlenecks and heightened global uncertainty,' the AfDB said. In his opening remarks, Dr Abdul Kamara, Director General for Nigeria at the African Development Bank, emphasised the significance of this moment for the country's development agenda. He said, 'This report is both timely and practical. Nigeria is demonstrating bold leadership through difficult but necessary reforms. Its capital is more than financial; it includes human, natural, and institutional assets. What this report shows is the need for integrated strategies that make every form of capital work together to drive inclusive and sustainable transformation.' Prominent among the report's findings is the urgent need to enhance domestic resource mobilisation to close Nigeria's annual development financing gap of USD 31.5 billion. While tax reforms and non-oil revenue expansion are beginning to yield results, the informal sector remains large, tax compliance low, and the tax-to-GDP ratio among the lowest in the region. Mr Olufemi Olarinde, Head of Fiscal and Tax Reforms Implementation Division at the Federal Inland Revenue Service (FIRS), officially launched the report on behalf of the Federal Government, noting its relevance to Nigeria's current fiscal trajectory. He said, 'We appreciate the efforts of the African Development Bank in contributing to this important report, which reflects our ongoing work in fiscal and tax reforms. It accurately captures both the strides we are making and the challenges we face as we strengthen Nigeria's public finance system.' To meet development goals, the CFR recommends broadening the tax base, improving compliance, reducing tax expenditures, and investing in the institutional capacity of revenue-generating agencies, while ensuring public spending is both efficient and impactful. The report also highlights governance constraints as key obstacles to effective capital mobilisation; fragmented oversight, overlapping mandates, and limited institutional coordination continue to undermine public trust and investment confidence. In this context, Dr Jacob Oduor, Lead Economist for West Africa at the African Development Bank, emphasised that policy tools like market-based exchange rate systems can support Nigeria's economic resilience but only when backed by credible institutions and disciplined macroeconomic management. Reinforcing this, Peter Engbo Rasmussen, Country Economist for Nigeria, noted: 'Nigeria's commitment to fiscal reform is crucial to building a resilient economy. The CFR reveals that strengthening non-oil revenue and improving public financial management will not only reduce reliance on volatile oil markets but also provide the fiscal space needed to invest in people and infrastructure.' Beyond fiscal policy, the CFR aligns with private-sector perspectives. Dr Joseph Ogebe, Head of Research and Development at the Nigeria Economic Summit Group (NESG), echoed the report's attention to inflationary pressure and the role of productivity. He said, 'The CFR's findings resonate with our position at NESG. Price stability remains a pressing concern, with inflation disproportionately affecting micro and medium-sized businesses. We continue to advocate for a productivity-led deflation strategy and recommend a growth-with-depth approach that prioritises sustainable economic expansion over reliance on borrowing.' The 2025 Nigeria Country Focus Report is part of the Bank's annual analytical series that mirrors the African Economic Outlook at the country level. These reports offer localised, evidence-based analysis tailored to national priorities and are designed to support reform implementation, policy dialogue, and development planning across the Bank's Regional Member Countries. Copyright © 2022 Nigerian Tribune Provided by SyndiGate Media Inc. (
