South Africa has suffered another growth forecast cut this time by the International Monetary Fund, IMF which says the continent’s second largest economy will only grow by a razor thin 0.1% in 2016, down from an earlier estimate of 0.6%
The growth estimate published by the fund Thursday is the lowest growth forecast for South Africa by a major institution, and is much lower than the Treasury’s 0.9% and the Reserve Bank’s 0.6%.
It was always thought that South Africa faced downside risks stemming mainly from its linkages with China and now heightened global financial volatility coupled with domestic politics and policies that were perceived to harm confidence.
Thursday the IMF’s executive board members pointed to these same risks.
At 0.1% economic growth — the slowest since the recession seven years ago — per capita incomes would continue to decline and unemployment was likely to rise further. SA’s unemployment is at 26.7%.
The IMF predicts economic growth at 1.1% in 2017 and at between 2% to 2.5% from 2018, “as shocks dissipate and more power plants are completed.”
Greater competition, labour market policies and industrial relations that work for a greater portion of the population, better quality of government services — especially in education — and improved governance and efficiency in state-owned enterprises would all help increase growth, according to the IMF.
The fund commended the country for making progress in supplying power as well as for the recent improved working relations between the government, business and labour, saying “the recent dialogue between social partners could catalyse reform implementation and invigorate growth”.
