The International Monetary Fund (IMF) said it has revised South Africa’s GDP down to 2.6 percent and that it would achieve a growth rate of 3.6 percent in 2013. In 2011, GDP growth stood at three percent.
The IMF’s forecast was released after its representatives visited South Africa in May and June. “Although the 2012 GDP growth rate is likely to moderate to about 2.6 percent given the weak external conditions and heighted global uncertainty, it is projected to gradually recover over the medium term to its potential rate of about three percent,” said the IMF in its report.
Concerns were also raised about the European Crisis and the signs of slowdown in China which could negatively impact and slower the demand for South Africa’s expoerts and reduce commodity prices.
National Treasury issued a statement saying that it welcomed the IMF’s assessment that ‘South Africa has a stable and resilient economy but that one could do better’. Treasury added that the IMF’s forecast was marginally below National Treasury’s forecasts made during the tabling of the Budget in February of 2.7 percent for 2012 and 3.6 percent for 2013.
The IMF also warned that South Africa’s stubbornly high unemployment rate could become ‘politically and socially unsustainable’ if it is not addressed. It said South Africa needed to ‘expand employment opportunities, secure better education and health outcomes, and build more efficient infrastructure to support inclusive growth, while maintaining macroeconomic and financial stability in a risky global environment’.
The report did however praise South Africa’s financial sector. ‘The financial sector weathered the global financial crisis well. Financial institutions have remained well-capitalized and liquid, and banks’ non-performing loans have partly recovered from the effects of the financial crisis. Although vulnerabilities remain, prudent supervision and the limited dependency on external funding have isolated the banking sector from the recent stress in global financial markets’, said the report.
Treasury added: “Many of the issues raised by the IMF report are already reflected in the priorities and outcomes that government has set itself, including work on inclusive growth, policies aimed at accelerating job creation, and measures to improve the efficiency and effectiveness of government spending.” Government is set to update its macroeconomic forecasts on 24 October 2012 when the Minister of Finance tables the 2012 Medium Term Budget Policy statement.