Johannesburg - Lack of structural reform in South Africa has prompted economists to trim forecasts for growth in the next two years, as low interest rates will not be enough to stimulate consumer demand, a Reuters poll showed on Thursday.
Forecasts for Africa's biggest economy for 2014 and 2015 were lowered by 0.1 percentage point apiece from last month's median, and are now 2.9 and 3.4 percent respectively.
This year, growth is expected to slow to 2.0 percent, after a 2.5 percent expansion in 2012.
Finance minister Pravin Gordhan on Monday confirmed that economic growth won't reach its 2.7 percent target this year, but said it will not fall below 2 percent.
“It is becoming increasingly clear that South Africa will struggle to achieve sufficient growth to make a meaningful dent in high unemployment without structural economic reforms,” said Peter Worthington, an economist at Absa Capital, in a note.
The number of unemployed rose to 4.723 million in the second quarter of 2013, around a quarter of the labour force and the highest since the government started the survey in 2008.
The central bank said on Wednesday that South Africa's economy needed to grow at 5 percent to make inroads into joblessness.
The unemployment rate has been stuck around 25 percent for the past several years and is one of the biggest headaches for President Jacob Zuma's ruling African National Congress ahead of elections next year.
“The need for structural reform has become even more apparent as global conditions are becoming less supportive and demand management policies are currently too stretched to stimulate growth,” Worthington said.
Economists polled expected the central bank to keep the repo rate at its four-decade low of 5.0 percent through next year and then raise it by 100 basis points in total in 2015.
Inflation next year is seen on average at 5.6 percent, below the central bank's 6 percent ceiling, and moderating to 5.5 percent in 2015.
Investors still seem undeterred by South Africa's economic woes: the resource-heavy Johannesburg Top 40 index is seen climbing over 3 percent to new all-time highs before the year ends, as resource stocks and the global economy regain momentum. - Reuters