The International Monetary Fund downgraded its economic growth forecasts for South Africa, warning that logistical challenges are constraining activity and acting as a drag on the entire region.

The economy will likely grow a meagre 1% this year, significantly slower than the IMF’s forecast in October, when it saw South Africa’s GDP expanding by 1.8%, the Washington-based lender said on Tuesday in an update to its World Economic Outlook.

That’s due chiefly to “all of the disruptions we’ve seen in the energy sector and also the logistics — in transportation, freight and ports in South Africa”, IMF chief economist Pierre-Olivier Gourinchas said in an interview. “That needs to be addressed.”

The country has been handicapped by rolling power cuts and snarled logistics at its ports and railways that reflect years of inadequate investment and poor management. The fund cut the country’s 2025 forecast to 1.3% from 1.6%.

Gourinchas was also cautious about South Africa’s frail fiscal position and elevated public debt levels. Finance minister Enoch Godongwana will deliver his annual budget speech on 21 February.

“We were talking about the need for fiscal consolidation for South Africa,” he said. “There is a need also to put public spending under control and to raise tax revenues.”

South Africa will hold elections this year, posing additional challenges to the public purse.

At risk

With polls showing the ANC at risk of losing its majority for the first time since 1994, some elements of the party will likely oppose spending cuts, even as the treasury argues for fiscal restraint.

The country’s tepid performance is also holding back the entire region. While the IMF sees sub-Saharan Africa growing by 3.8% this year, it’s notched that outlook back sightly.

Read: Energy, logistics crises are kneecapping South Africa’s economy

“The downward revision for 2024 of 0.2 percentage point from October 2023 mainly reflects a weaker projection for South Africa on account of increasing logistical constraints,” the lender said. — Ntando Thukwana, (c) 2024 Bloomberg LP