JOHANNESBURG – A high-ranking member of the South African Reserve Bank (Sarb) has warned that the country would struggle to grow the economy to meet the needs of its ballooning population.
Francois Groepe, the deputy governor of the Sarb, told an RMB Morgan Stanley investor conference that difficult conversations about redistribution had become unavoidable.
“At the current level of potential GDP growth - which the Sarb estimates to be between 1and 1.4percent over the next three years - the economy is not able to generate real per capita income gains on a sustained basis,” Groepe said.
“Achieving a more equitable distribution of income is particularly challenging if it is not possible to grow the economy faster than the rate of population growth.”
The economy is in a technical recession following a contraction for the first two quarters of the year against a population growth of 1.6 percent per year. Last month, Sarb lowered its growth forecasts to a modest 0.7percent for this year.
“Prospects for South Africa's economic growth outlook rely partly on the global economic outlook, but are also limited by domestic structural rigidities,” Annabel Bishop, chief economist at Investec, said.
Groepe warned that a trade-off between inflation and growth would be necessary, and that the transition to a lower inflation path would not be without costs.