The International Monetary Fund cut its economic growth forecast for South Africa by almost half to 0.7% on Tuesday, citing weak commodity prices and high borrowing costs.
The IMF’s forecast is a full percentage point lower than the economic growth rate forecast by the National Treasury for 2016.
The IMF said in its World Economic Outlook report the continued adjustment to lower commodity prices and higher borrowing costs are weighing heavily on some of sub-Saharan Africa’s largest economies, including South Africa, Nigeria and Angola, as well as a number of smaller commodity exporters.
To this end most countries in sub-Saharan Africa will see a gradual pickup in growth, but with lower commodity prices, to rates that are lower than those seen over the past decade, the IMF said.
DA MP David Maynier said in a statement on Tuesday the downward revision is in part due to a failure of economic policy: structural constraints on economic growth and job creation including policy uncertainty, electricity shortages, and labour market reform remain.
The IMF adjusted its projection for South Africa’s growth to 0.7% in 2016 and 1.8% in 2017 from its October estimate of 1.3% and 2.1% respectively.
With economic growth slowing to 0.7%, job shedding will continue with fewer job opportunities available for the 8.4 million people who do not have jobs or have given up looking for jobs in South Africa, said Maynier.
“As the economy tanks all eyes are on whether President Jacob Zuma will announce new measures to boost economic growth and job creation during his State of the Nation Address on 11 February 2016 in Parliament.”
Overall, forecasts for global growth have been revised downward by 0.2 percentage point for both 2016 and 2017, “reflecting to a substantial degree, but not exclusively, a weaker pickup in emerging economies,” the IMF said.
For sub-Saharan Africa the IMF lowered its growth forecast for 2016 by 0.3 percentage points to 4% and reduced next year’s estimate by 0.2 percentage points to 4.7%. – Fin24
IMF Cuts South Africa’s Economic Growth Forecast by Almost Half
By Rene Vollgraaff
(Bloomberg) — The International Monetary Fund cut its economic growth forecast for South Africa by almost half to less than 1 percent as commodity prices slump and global demand remains weak.
Gross domestic product in Africa’s most industrialized nation will probably expand 0.7 percent this year, compared with October’s estimate of 1.3 percent, the Washington-based lender said in an update to its World Economic Outlook report on Tuesday. The IMF cut its projection for 2017 by 0.3 percentage points to 1.8 percent.
South Africa’s economy is struggling to cope with a plunge in metal prices, fueled by a slowdown in its biggest export market, China. Barclays Africa Group Ltd. on Monday cut its 2016 GDP growth forecast for South Africa to 0.9 percent from 1.4 percent, while Bank of America Merrill Lynch slashed its projection by a full percentage point to 0.4 percent last week.
Finance Minister Pravin Gordhan is set to announce new growth forecasts in his budget speech next month. The government had projected expansion of 1.7 percent for this year.
The IMF lowered its growth estimate for sub-Saharan Africa for this year by 0.3 percentage points to 4 percent and reduced next year’s estimate by 0.2 percentage points to 4.7 percent. That “mainly reflects the continued adjustment to lower commodity prices and higher borrowing costs, which are weighing heavily on some of the region’s largest economies,” it said.