Johannesburg - The International Monetary Fund has lowered its forecast for South Africa’s economic growth to 1.2% in 2019 and to 1.5% in 2020, saying political and policy uncertainty remained a constraint on activity, and putting the country among the worst performers in sub-Saharan Africa.
South Africa’s economy grew 0.8% in 2018, and the 1.2% expansion projected by the IMF is down from its October forecast of 1.4%.
In its World Economic Outlook before its spring meetings in Washington scheduled to take place this month, the Washington-based lender called for gradual fiscal consolidation to stabilise the public debt.
“The projected recovery reflects modestly reduced but continued policy uncertainty in the South African economy after the May 2019 elections. Structural bottlenecks would continue to weigh on investment and productivity, while subdued metal export prices were also a risk,” said the IMF.
South Africa has seen growth stagnate in the decade since the world’s financial crisis, with policy missteps under former President Jacob Zuma making worse global conditions marked by a plunge in commodity prices and a rise in the cost of capital.
The IMF called for gradual fiscal consolidation to stabilise the country’s public debt.
The monetary fund added that SA’s transfers to state-owned entities should be contingent on downsizing and eliminating wasteful expenditure while public wage savings should be prioritised to boost investment growth.
“Structural reforms, particularly to product and labour markets, would foster an environment conducive to expanding private investment, job creation, and productivity growth,” added the IMF.
The decision by the IMF comes after SA treasury slashed growth forecast at the end of March to 1.3% in 2019 from 1.7%. It also revised growth for 2020 and 2021 down by 0.2 percentage points to 1.8% and 2%, respectively.
The fund projected that real GDP growth in sub-Saharan Africa would average 3.4% in 2019, meaning South Africa would be growing at less than half the average rate.
Of the African countries listed in the report, only Angola, which is recovering from a recession, is expected to average lower GDP growth than South Africa in 2019.
President Cyril Ramaphosa has pledged to re-ignite growth by attracting R1.2 trillion in investments in the next five years and improving the ease of doing business in the country. However, he faces an uphill battle, with nationwide electricity blackouts expected to dim business and consumer confidence before national elections on 8 May.