IMF revises SA growth forecast, lowers global predictions
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THE INTERNATIONAL Monetary Fund (IMF) has revised upwards by 1 percent South Africa's growth forecast for 2021, even as it lowered the global growth forecasts.
In its latest World Economic Outlook, the IMF yesterday said South Africa's gross domestic product (GDP) will now grow by 5 percent this year, up from 4 percent previously forecast in July.
The IMF's forecast is in line with the SA Reserve Bank (SARB) which also revised upwards the 2021 GDP forecast to 5.3 percent from a previous forecast of 4.2 percent. For 2022, the IMF said the South African economy will grow by 2.2 percent as the recovery from the Covid-19 pandemic stabilises.
The IMF said the economic and fiscal policy assumptions underlying the projections in South Africa drew on the 2021 Budget.
“Non-tax revenue excludes transactions in financial assets and liabilities, as they involve primarily revenues associated with realised exchange rate valuation gains from the holding of foreign currency deposits, sale of assets, and conceptually similar items,” it said.
Meanwhile, the IMF revised slightly its global growth outlook for 2021 to 5.9 percent from 6 percent forecast in July, citing a downgrade for advanced economies. The IMF said the 0.1 percent downward revision for 2021 reflected a downgrade for advanced economies, in part due to supply disruptions, and for low-income developing countries, largely due to worsening pandemic dynamics.
It said this was partially offset by stronger near-term prospects among some commodity-exporting emerging market and developing economies.
However, the rapid spread of Delta and the threat of new variants have increased uncertainty about how quickly the pandemic can be overcome.
The US economy was seen expanding 6 percent, down from 7 percent forecasted in July, and China growing 8 percent, 0.1 percentage point lower than in July. For 2022, the IMF left the global growth forecasts unchanged at 4.9 percent.
IMF chief economist Gita Gopinath said the global recovery continued but momentum had weakened, hobbled by the pandemic. Gopinath said pandemic outbreaks in critical links of global supply chains had resulted in longer than expected supply disruptions, feeding inflation in many countries.
“The divergences in growth prospects across countries, however, persist and remain a major concern,” Gopinath said. “One of the major risks remains that there could be new variants of the virus that could further slow back the recovery.
“We are seeing major supply disruptions around the world that are also feeding inflationary pressures, which are quite high and financial risk taking also is increasing, which poses an additional risk to the outlook.”
On the inflation front, the IMF said consumer prices in South Africa will remain accommodative, with inflation remaining within the target band at 4.4 percent this year, rising to 4.5 percent in 2022.
It said in most cases, rising inflation reflected pandemic-related supply-demand mismatches and higher commodity prices which were expected to subside in 2022.
In some emerging market and developing economies, however, the IMF said price pressures were expected to persist because of elevated food prices, lagged effects of higher oil prices, and exchange rate depreciation lifting the prices of imported goods.