Economy 'victim of political fighting'
The UN said during the release of its World Economic Situation and Prospects 2020 report yesterday in Johannesburg that growth in South Africa was now estimated at 0.5 percent for 2019, remaining well below potential amid weak investment, energy shortages and high unemployment.
Managing director of research at Plus Economics, Dr Kirsten Thompson, said the country needs to revive growth on the supply side, because the demand side remains subdued.
“The South African economy has become a victim of political fighting, and if we can just sort that out , our economy can find the space it needs to grow,” Thompson said.
“It is not up to the government to create jobs, it is up to the government to be a facilitator, protector and enabler of our business environment.
“We need domestic investors and foreign investors to be spearing business activity, because when we have strong business activity that becomes the engine room of our economy of creating jobs.”
Over the last decade the South African economy has been battered by a string of crippling power cuts, uncertainty over policy direction, and weak business activity.
The UN said gross domestic product (GDP) per capita growth was projected to remain in negative territory in 2020. This follows the IMF lowering of the economic growth to 0.8 percent this year, down from a previous forecast of 1.1 percent growth.
The SA Reserve Bank also lowered its forecast of GDP growth for 2019 to 0.4 percent from 0.5percent, and to 1.2percent from 1.4percent for 2020.
The UN said prospects for a vigorous recovery in South Africa were feeble.
It said the South African economy would likely continue to be negatively affected by policy uncertainties, weak business sentiment and limited fiscal policy space.
Elliott Harris, UN chief economist and assistant secretary-general for economic development, called for a “more balanced policy mix”.
Harris said the over-reliance on monetary policy was not just insufficient to revive growth, but also entailed significant costs, including the exacerbation of financial stability risks.
“A more balanced policy mix is needed, one that stimulates economic growth while moving towards greater social inclusion, gender equality, and environmentally sustainable production,” he said.
“Policymakers should move beyond a narrow focus on merely promoting GDP growth, and instead aim to enhance well-being in all parts of society.
“This requires prioritising investment in sustainable development projects to promote education, renewable energy, and resilient infrastructure.”