The International Monetary Fund (IMF) predicts that South Africa’s GDP will grow only marginally at 0.8% in 2017 – lower than the 1% forecast in July.
In its latest World Economic Outlook report, the IMF retained its 2016 projection at 0.1% and said policy uncertainty in the country complicates the adjustment to weaker terms of trade.
However, commodity prices and the drought will dissipate somewhat and with an improvement in power supply the economy will make a “modest recovery” in 2017.
Like rating agencies Standard & Poor’s, Moody’s and Fitch, the IMF also remarks that growth prospects for South Africa will hinge on whether the country would be able to improve the efficiency and governance at its state-owned enterprises.
“Measures to improve state-owned enterprises’ efficiency and governance, including through greater private participation can lift growth prospects and reduce contingent fiscal risks,” the report notes.
In the report South Africa’s high unemployment rate, policy uncertainty and political risks are singled out as obstacles to growth.
“A comprehensive structural reform package that fosters greater product market competition, more inclusive labour market policies and industrial relations, and improved education and training, as well as reducing infrastructure gaps is critical to boost growth, create more jobs, and reduce inequality,” the report says.
As for the rest of Sub-Saharan Africa, the IMF predicts that another large economy – Nigeria – will shrink by 1.7% in 2016, due to lower commodity revenues.
By contrast, several of the region’s non-commodity exports, including Côte d’Ivoire, Ethiopia, Kenya and Senegal, are expected to grow at a robust pace of more than 5% in 2016.
Advanced economies, such as the United States (US) and the United Kingdom (UK), will expand on average only at 1.6% in 2016 – also a downward revision from the July forecast of 1.8%.
The forecast for the US has been marked down from 2.2% in July to 1.6% and further increases in the Federal Reserve’s policy rate “should be gradual”, the IMF noted.
Continuing uncertainty following the Brexit referendum in June when the UK voted in favour of leaving the European Union (EU) will slow down the UK’s growth from 2.2% last year to 1.8% in 2016. Growth is predicted to decline further to 1.1% in 2017.
FOLLOW NEW AFRICA BUSINESS NEWS ON FACEBOOK @ New Africa Business News.com