Johannesburg - The economy was expected to grow by 0.6 percent this year, down slightly from the 0.7 percent forecast in January, as weaker exports and policy uncertainty took their toll, the International Monetary Fund (IMF) said yesterday.
In its World Economic Outlook update for April, the IMF also now expects lower growth of 1.2 percent for South Africa in 2017, having predicted 1.8 percent in January.
Read: SA economy weighed down by uncertainty
South Africa’s expansion of 1.3 percent last year was the lowest rate since the 2009 recession as the economy struggled to cope with a plunge in metal prices, fuelled by a slowdown in its biggest export market, China, and the worst drought in more than a century.
The Reserve Bank raised its benchmark rate twice this year to 7 percent to try to tame inflation that surged to 7 percent in February.
The IMF reiterated its gross domestic product growth projection for Africa’s powerhouse Nigeria of 2.3 percent this year, down 1.8 percentage points from the previous estimate in January. Growth in Kenya was now seen at 6 percent in 2016, down from the 6.8 percent predicted last December.
The IMF said output from sub-Saharan Africa would remain subdued this year before picking up in 2017 on the back of an expected small rebound in commodity prices.
Veer off
Investors have been worried that South Africa, which boasts the most industrialised economy on the continent – despite coming second to Nigeria in size, could veer off prudent policies under political pressure, after President Jacob Zuma suddenly fired the finance minister in December.
“In South Africa, growth is expected to be halved to 0.6 percent in 2016, owing to lower export prices, elevated policy uncertainty and tighter monetary and fiscal policy,” the global lender said.
In its February budget, the Treasury cut its own forecasts substantially to 0.9 percent and 1.7 percent, respectively, for this year and 2017.
The Treasury has said it will not be distracted from implementing policies to boost growth, despite the political storm that erupted after the highest court found Zuma breached the constitution by failing to repay some of the state money spent on renovating his home.
The IMF said growth in sub-Saharan Africa’s oil exporting countries, including Nigeria and Angola, was seen as lower as the negative impact of lower oil prices was compounded by disruptions to private sector activity through exchange rate restrictions.
The IMF forecasts global growth of 3.2 percent this year, picking up to 3.5 percent in 2017.
* With additional reporting by Reuters
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