IMF economist Gita Gopinath said the global economy was in a synchronised slowdown. File Photo: Reuters

JOHANNESBURG – The International Monetary Fund (IMF) has lowered South Africa’s economic growth forecast for 2019 by 0.5 percentage points, from 1.2 percent forecast in April to 0.7 percent, as global growth also slowed down.

In the October World Economic Outlook released on Tuesday, the IMF said growth in South Africa was expected to be weaker than projected in April, despite a moderate rebound in the second quarter.

The IMF outlook said this slow growth forecast followed a very weak first quarter, in which the economy slowed 3.2 percent, reflecting a larger-than-anticipated impact of labour strikes and energy supply issues in mining, together with weak agricultural production.

The IMF’s growth forecast for South Africa solidifies the country’s moribund economy after the World Bank last week also slashed its growth forecast, saying the economy would expand 0.8 percent this year from a 1.3 percent forecast in April.

In September, the South African Reserve Bank forecast for gross domestic product for 2019 to remain unchanged at 0.6 percent, firmly putting the domestic economy in the sub-1 percent territory and joining the likes of Brazil, Mexico, Russia, and Saudi Arabia, among others.

In sub-Saharan Africa, the IMF said growth was expected at 3.2 percent in 2019 and 3.6 percent in 2020 – slightly lower for both years than projected in April. 

The IMF said more than half the countries were expected to register per capita growth lower than their median rate during the past 25 years, except in sub-Saharan Africa. 

Emerging and developing Asia remains the main engine of the world’s economy, but the IMF said growth was softening gradually with the structural slowdown in China. 

But growth in emerging markets and developing economies was revised down to 3.9 percent for 2019, compared to 4.5 percent in 2018, owing in part to trade and domestic policy uncertainties, and to a structural slowdown in China.

The IMF also cut the global growth estimate to 3 percent, its weakest since 2009, as a result of global economic risks, rising debt levels and trade tensions.

The global economy experienced a subdued momentum, weak trade and industrial production in 2019 as it saw a sharp downturn in car production and sales, weak business confidence and a slowdown in demand in China.

However, the IMF said growth was projected to improve modestly to 3.4 percent in 2020, a downward revision of 0.2 percent from April projections. 

IMF economist Gita Gopinath said the global economy was in a synchronised slowdown.

“The weakness in growth is driven by a sharp deterioration in manufacturing activity and global trade, with higher tariffs and prolonged trade policy uncertainty damaging investment and demand for capital goods,” Gopinath said. 

Eric LeCompte, the director of Jubilee USA, a non-profit financial reform organisation, said this was the bleakest economic outlook report that he had seen from the fund.

“World leaders should be very concerned. Inequality is on the rise, even in some of the richest societies,” LeCompte said.

BUSINESS REPORT