The International Monetary Fund (IMF) expects South Africa to become Africa’s largest economy next year. In its recent World Economic Outlook report, the institution projected the country’s GDP to reach $401 billion in 2024. For Nigeria and Egypt, on the other hand, it expects $395 billion and $358 billion, respectively. But will it happen?

Notably, the IMF only expects South Africa to hold that position for one year and return to third place by 2026. Something similar happened in 2016 when South Africa briefly took the number one spot from Nigeria. However, IMF data shows Nigeria’s economy has eclipsed South Africa’s since 2018.

Nigeria’s economy is struggling this year, thanks to a decline in oil production, runaway inflation and a plunge in the naira’s value. And the IMF is making its predictions because of these challenges.

Since becoming president of the West African nation at the end of May, Bola Tinubu has implemented nerve-touching policy reforms to restore the state’s fiscal health, such as overhauling the foreign exchange system, removing expensive petrol subsidies and taking steps to ease dollar shortages and increase tax revenue. These measures are taking a toll on the economy. But many observers, including the IMF, believe they will yield benefits in the future. Last week, Daniel Leigh, IMF’s research division chief, said these reforms should lead to “stronger and more inclusive growth” at the fund’s annual meetings in Marrakech, Morocco. The IMF sees GDP expanding 3.1% next year, compared with 2.9% in 2023.

Since early 2022, Egypt has devalued its currency three times and lost almost half its value against the dollar as it deals with a foreign exchange shortage. 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 the 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 planned for March and September. Successful appraisals could unlock about $700 million in deferred loan tranches, give Egypt access to a $1.3 billion resilience fund and potentially spur significant Gulf investments. According to Bloomberg, the government is also in talks with the IMF on boosting its rescue package to more than $5 billion, confident it can overcome the challenges preventing it from accessing support, including addressing concerns over its currency policy. According to the IMF, implementing a reform agenda could underpin an economic growth rate of 5% or more from 2026.

Unlike Nigeria’s naira and Egypt’s pound, South Africa’s rand is free-floating and has depreciated by about 10% against the dollar this year. The currency weakness has been driven by fears that the National Treasury will not achieve its budget deficit and debt-to-GDP targets for the fiscal year through March due to increased state support and revenue shortfalls, as a worsening transport network and record power cuts hamper economic growth.

The IMF forecasts South Africa’s economy to expand by 0.9% this year and 1.8% in 2024, with the potential to increase by 2.5% to 3% faster if it improves the power situation, tackles logistic bottlenecks and enacts other reforms.

Should anyone be bothered?

In real terms, ranking first or second for economic size is a lot less consequential than it’s hyped to be. The country’s prospects and the overall distribution of wealth are what matter the most. Several countries with smaller GDPs are more economically buoyant than the top three, e.g. Botswana and Morocco.

So, if anyone should be bothered, it shouldn’t be about whether their country gains or loses the top spot for GDP size. It should be about how much room for growth they have. And currently, proving this potential to investors is a hard task for these three.

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