THE International Monetary Fund (IMF) has cut South Africa’s economic growth outlook for the fourth consecutive time this year, making it the latest in a number of institutions to lower gross domestic product forecasts as strikes, weak demand and energy supply constraints stifle the economy.
South Africa’s economy is growing at less than 2% – lower than its potential growth rate of above 3% and the more than 5% per year it aspires to in order to address high unemployment and poverty.
The IMF cut South Africa’s economic growth outlook for this year to 1.4% from 1.7% in July in its latest World Economic Outlook report, released yesterday. It also revised its projection for next year down to 2.3% from .7%.
“In South Africa, 2014 growth is being dragged down by industrial tensions and delays in fixing infrastructure gaps, including electricity constraints,” the IMF said.
Growing SA’s economy needs “removing infrastructure bottlenecks in the power sector”, implementing reforms in education, labour and product markets to raise competitiveness and productivity, and improving service delivery, it said.
The government has invested billions of rand in infrastructure development over the past two decades, but the pace of implementing infrastructure investment plans has been slow in recent years and strikes have often disrupted the construction of infrastructure such as power stations.
Barclays Africa economist Peter Worthington said while work was under way to alleviate capacity constraints and infrastructure shortcomings, the labour environment was likely to be a challenge for a while longer.
“I doubt we will see significant changes to our labour markets framework from the labour market indaba scheduled for November, because business and labour remain very far apart and government so far has not demonstrated much ability to bring the two sides together,” he said.
The IMF said, however, that its expectation of a “muted” economic recovery next year was driven by expectations that labour relations would improve and exports would be “gradually stronger”.
It said the “significant” rand depreciation had so far resulted in a limited amount of “much-needed external adjustment”.
South Africa’s weak economic growth is partly attributed to weak global demand and to local factors such as strikes and disruptions to the electricity and water supply.
Renaissance Capital economist Thabi Leoka said what was worrying was a “lack of response” by policy makers to the downward revisions that “we have become accustomed to”.
She acknowledged, however, that Transnet was “charging ahead” with plans to address bottlenecks in rail infrastructure.
South Africa’s inadequate energy supply was increasingly becoming an impediment to economic growth and a deterrent to new investment, Leoka said.
Last month, the Reserve Bank cut its economic growth forecast for this year to 1.5% from 1.7%, while the Treasury is expected to lower its forecast this month from an ambitious 2.7% in February.
The IMF slightly revised down the global economic growth outlook for the year to 3.3% from 3.4%, and to 3.8% for next from 4%.
“So long as demand remains weak ... monetary accommodation and low interest rates remain of the essence,” IMF chief economist Olivier Blanchard said. — BDLive
IMF cuts SA growth outlook down to 14%
THE International Monetary Fund (IMF) has cut South Africa’s economic growth outlook for the fourth consecutive time this year, making it the latest in a number of institutions to lower gross domestic product forecasts as strikes, weak demand and energy supply constraints stifle the economy.
South Africa’s economy is growing at less than 2% – lower than its potential growth rate of above 3% and the more than 5% per year it aspires to in order to address high unemployment and poverty.
The IMF cut South Africa’s economic growth outlook for this year to 1.4% from 1.7% in July in its latest World Economic Outlook report, released yesterday. It also revised its projection for next year down to 2.3% from .7%.
“In South Africa, 2014 growth is being dragged down by industrial tensions and delays in fixing infrastructure gaps, including electricity constraints,” the IMF said.
Growing SA’s economy needs “removing infrastructure bottlenecks in the power sector”, implementing reforms in education, labour and product markets to raise competitiveness and productivity, and improving service delivery, it said.
The government has invested billions of rand in infrastructure development over the past two decades, but the pace of implementing infrastructure investment plans has been slow in recent years and strikes have often disrupted the construction of infrastructure such as power stations.
Barclays Africa economist Peter Worthington said while work was under way to alleviate capacity constraints and infrastructure shortcomings, the labour environment was likely to be a challenge for a while longer.
“I doubt we will see significant changes to our labour markets framework from the labour market indaba scheduled for November, because business and labour remain very far apart and government so far has not demonstrated much ability to bring the two sides together,” he said.
The IMF said, however, that its expectation of a “muted” economic recovery next year was driven by expectations that labour relations would improve and exports would be “gradually stronger”.
It said the “significant” rand depreciation had so far resulted in a limited amount of “much-needed external adjustment”.
South Africa’s weak economic growth is partly attributed to weak global demand and to local factors such as strikes and disruptions to the electricity and water supply.
Renaissance Capital economist Thabi Leoka said what was worrying was a “lack of response” by policy makers to the downward revisions that “we have become accustomed to”.
She acknowledged, however, that Transnet was “charging ahead” with plans to address bottlenecks in rail infrastructure.
South Africa’s inadequate energy supply was increasingly becoming an impediment to economic growth and a deterrent to new investment, Leoka said.
Last month, the Reserve Bank cut its economic growth forecast for this year to 1.5% from 1.7%, while the Treasury is expected to lower its forecast this month from an ambitious 2.7% in February.
The IMF slightly revised down the global economic growth outlook for the year to 3.3% from 3.4%, and to 3.8% for next from 4%.
“So long as demand remains weak ... monetary accommodation and low interest rates remain of the essence,” IMF chief economist Olivier Blanchard said. — BDLive
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