The World Bank has become the latest to downgrade SA’s economic growth forecasts for this year and next, warning that the slowdown in growth coupled with the drought would drive thousands more people into poverty.
The bank sees SA’s economy growing 0,8% this year from an earlier forecast of 1,4%. The forecast for next year was revised downwards to 1,1% from 1,6%. The Bank released its South African economic update on Tuesday.
It said that while it did not forecast a recession for SA, the extremely low levels of economic growth would lead to further declines in per capita incomes.
The “dramatic deterioration” in the economic growth outlook over the past few months reflected a sharper economic slowdown in China, lower commodity prices, domestic policy uncertainty and the drought, World Bank lead economist for SA Catriona Purfield said.
The drought could have shaved off 0,2 percentage points from gross domestic product last year and pushed an estimated 50 000 people into poverty, the bank said.
With monetary and fiscal policy already “constrained, the onus is on other reforms to lift the long-term growth trajectory” of SA, Purfield says.
One of these reforms was highlighted as improving competition policy to reduce input costs. Competition could also be supported through better regulation, the bank says.
The bank estimates that SA will need to grow at more than 7% on average from 2018 if it is to significantly reduce poverty and double incomes.
By Ntsakisi Maswanganyi for www.bdlive.co.za