Johannesburg - The economic outlook for South Africa next year and 2017 was uncertain and economic activity would remain subdued, the Organisation for Economic Co-operation and Development (OECD) said in a report yesterday.
The OECD said in its latest twice-yearly Economic Outlook report that it expected increases in electricity supply from investments in generating capacity should raise supply only by 2017, easing constraints that had hindered production and increasing investor confidence.
Turning to the globe, the OECD said a further sharp downturn in emerging market economies and world trade had weakened global growth to about 2.9 percent this year, well below the long-run average and was a source of uncertainty for near-term prospects.
The OECD projects a gradual strengthening of global growth in 2016 and 2017 to an annual 3.3 percent and 3.6 percent, respectively.
However, the OECD said that a clear pick-up in activity required a smooth rebalancing of activity in China and more robust investment in advanced economies.
In the US, output remains on a solid growth trajectory, propelled by household demand, with gross domestic product (GDP) expansion expected to be 2.5 percent next year and 2.4 percent in 2017.
Economic growth in China is projected to slow to 6.8 percent this year and to continue to decline gradually thereafter, reaching 6.2 percent by 2017, as activity rebalances towards consumption and services.
The report said achieving this rebalancing, while avoiding a sharp reduction in GDP growth and containing financial stability risks presented significant changes.
The OECD said in other emerging economies, headwinds had generally increased, reflecting weaker commodity prices, tighter credit conditions and lower potential output growth, with the risk that capital outflows and sharp currency depreciations might expose financial vulnerabilities.
“Brazil and Russia have experienced recessions and will not return to positive growth in annual terms until 2017. By contrast, growth prospects in India remain relatively robust, with GDP growth expected to remain over 7 percent in the coming years, provided further progress is made in implementing structural reforms.
“Also, strengthening growth in major trade partners, such as Europe and the US, should reinforce growth.
Inflation is hovering around the upper end of the target band, driven by the depreciation of the rand and higher electricity and food prices.”
The outlook calls for greater ambition by OECD and Group of Twenty countries in supporting demand and pursuing structural reforms to boost potential growth and ensure its economic benefits are shared by all.
The think-tank called for policies to support short-term demand, including ongoing monetary and fiscal policy support in accordance with countries’ policy space.
“Collective action to increase public investment is essential and would increase growth without increasing debt to GDP ratios.”
BUSINESS REPORT