The International Monetary Fund (IMF) has left SA’s 2016 economic growth forecast unchanged but cut the outlook for 2017, citing the effects of lower commodity prices, high unemployment and policy uncertainty on the economy.
SA’s economic outlook was “clouded by policy uncertainty and political risks,” the global lender said in its World Economic Outlook report released on Tuesday. The document gives an update on global economic developments and projections for world growth.
It left the 2016 growth forecast for SA at 0.1% but lowered that for 2017 to 0.8% from the 1% it projected just two months ago.
The country’s growth and employment could be boosted by the implementation of a comprehensive structural reform package that fostered greater product market competition, more inclusive labour market policies and industrial relations, and improved education and training, as well as reduced infrastructure gaps, the IMF said.
“Measures to improve state-owned enterprises’ efficiency and governance, including through greater private participation, are a particularly important element of the needed reform package to lift growth prospects and reduce contingent fiscal risks,” the fund said.
While some of these reforms might take time to yield positive growth effects, in the short term, they could improve confidence and signal policy consistency, it said.
The Reserve Bank said in its monetary policy review, released on Monday, that growth would increase on an improvement in global growth, higher net exports on a competitive rand, a recovery in investment, and a modest improvement in household spending in coming years.
Restoring growth rates to historical averages required deeper structural reforms without which the economy was expected to expand at rates between 1% and 2% for the foreseeable future, “generating little or no improvement in employment or individual living standards,” the Reserve Bank said.
The Bank expects economic growth at “lacklustre” rates of 0.4% in 2016, 1.2% in 2017 and 1.6% in 2018. The Bank’s outlook for 2016 was recently slightly upwardly revised following higher than expected growth in the second quarter.
The IMF cut sub-Saharan Africa’s 2016 economic growth forecast to 1.4% from 1.6% previously, and for 2017 to 2.9% from 3.3% earlier. It has not changed its projections for world economic growth and still expects it to advance 3.1% in 2016 and 3.4% in 2017.
By Ntakisi Maswanganyi for www.bdlive.co.za