The International Monetary Fund (IMF) has revised downwards South Africa’s growth forecast for 2021 as economic indicators have worsened further on additional Covid-19 outbreaks and deteriorating public finances.
The IMF on Wednesday estimated an output rebound of about 4.6 percent for 2021, down from the 5 percent projection it made in October.
The lender of last resort said South Africa’s recovery from last year’s record 6.4 percent contraction had not decreased the unemployment rate amid deteriorating confidence, anaemic private-sector investment, and weak credit extension.
As a result, the IMF also projected a lacklustre medium-term outlook, with growth averaging 1.4 percent per annum, inflation returning to the midpoint of the 3–6 percent target range, and the external current account reverting to its structural deficit.
“Declining private investment and productivity, which have been a hindrance to economic growth, need to be urgently reversed so that the country can produce goods and services of higher quality at lower costs that can compete in global markets,” said the IMF in a statement.
“Greater investment will generate more job opportunities for many South Africans, reducing poverty and inequality.
“Domestic risks include additional Covid-19 outbreaks, continued worsening performance of state-owned enterprises, delays or reversals in reform implementation, and social instability.”
An IMF team led by Ana Lucía Coronel held virtual meetings with the economic authorities and other counterparts from the public and private sectors from November to December 7.
Discussions focused on policy measures and reforms needed to transform the current South African cyclical rebound into a lasting, job-creating, inclusive, and green recovery.
The IMF urged the government to immediately tackle structural rigidities that were depressing private investment and hindering inclusive growth and job creation.
Unemployment in South Africa hit new record levels in the third quarter of 2021 as it remained elevated mainly due to economic destruction caused by the July civil unrest.
The rate of unemployment increased by 0.5 percentage points in the three months to September to reach 34.9 percent, up from 34.4 percent in the second quarter.
This week, Statistics South Africa (StatsSA) revealed that the economy shrunk by 1.5 percent in the three months to September following four quarters of consecutive growth.
If the decline in the gross domestic product (GDP) continues to the fourth quarter as a result of lockdowns and new Covid-19 variants, this could mean that South Africa will miss the growth forecasts of 5.1 percent and 5.3 percent by the National Treasury and the SA Reserve Bank, respectively.
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