IMF cuts SA’s predicted growth rate to less than 1%

Ramaphosa’s election has not ended uncertainty

FOLLOWING suit with the World Bank, the IMF has slashed South Africa’s economic growth forecasts for the next two years to below 1%.

South Africa is still expected to record subdued growth this year, according to the IMF’s latest World Economic Outlook, but increased political uncertainty is expected to weigh on confidence and investment.

Economic growth for this and next year was expected to remain below 1% at 0.9% for both years. This was a marked drop from the 1.1% previously expected for this year and the 1.6% expected for next year.

The IMF’s outlook was probably done way before South Africa’s latest attempts to bring political certainty. It was unlikely to have taken the most recent political developments into account.

The election of ANC president Cyril Ramaphosa, together with his drastic moves at the weekend to bring stability at power utility Eskom, could have been steps in the right direction and improved market confidence, said Investec chief economist Annabel Bishop.

But despite the recent developments, Dave Mohr, chief investment strategist at Old Mutual Multi-Managers, warned that political uncertainty remained.

“There are still two centres of power running the country – one in the Union Buildings and one at the ANC’s headquarters at Luthuli House, limiting the scope for reform.”

Ramaphosa, who is heading South Africa’s delegation to the World Economic Forum in Davos, Switzerland, has made all the right noises in terms of focusing on growth, investor confidence, combating corruption and fixing state-owned enterprises.

While the political outlook is uncertain, it is much less so than a few months ago, which should lift business and consumer confidence, Mohr said.

The IMF said sub-Saharan Africa had been weighed down by the weakness of its larger economies, particularly South Africa.

The growth pick-up in sub-Saharan Africa was projected from 2.7% in 2017 to 3.3% in 2018 and 3.5% in 2019.

A report from the World Bank two weeks ago indicated that South Africa’s growth was lagging behind other emerging economies, also citing policy and political uncertainty.

While the World Bank expected South Africa’s growth to rise to 1.1% this year from 0.8% last year, emerging markets were expected to average 4.5% growth in 2018. South Africa had also fallen below the global average of 3.1%.

Last week, the Reserve Bank raised its forecasts slightly. Growth for last year was revised up to 0.9% from 0.7%, while South Africa is expected to achieve growth of 1.4% rather than 1.2% this year.