Photo by: Duane Daws
The World Bank has again lowered its 2015 growth outlook for South Africa, while announcing that growth across sub-Saharan Africa (SSA) as a whole will also slow to its lowest level since 2009.
The bank expects South Africa to grow by only 1.5% in 2015, a material write-down from its forecast of 2% released in August.
It has also lowered its forecast for 2016 to 1.7% from 2% previously, while it is expecting the economy to expand only modestly by 2% in 2017, having previously forecast 2.4%.
Lead economist for South Africa Catriona Purfield said the revisions were underpinned by a substantial weakening in the price of commodities, such as platinum and iron-ore, as well as an expectation that the country’s electricity shortages will weigh on output.
In addition, consumer demand is expected to remain muted, with the anticipated benefits for households as a result of the fall in the oil price having been entirely offset by the decline in the rand.
Purfield warns that the outlook for employment growth and poverty reduction is also bleak in light of the weak growth performance. Under the bank’s recently redefined extreme poverty threshold of $1.90/day the bank says 14%, or 7-million, South Africans will be living in extreme poverty.
Meanwhile, the bank expects the SSA region to grow by 3.7% in 2015, down the from the 4.6% recorded in 2014 and well below the average growth rates of better than 6.5%, which were recorded between 2004 and 2008.
The biannual ‘Africa's Pulse’ publication, which was communicated via videolink from Washington DC on Monday, shows that the bank expects SSA growth to recover to 4.4% in 2016 and 4.8% in 2017.
However, author and acting chief economist Punam Chuhan-Pole warns that the region will not experience, in the near term, the favourable economic tailwinds that supported Africa’s strong pre-economic-crisis expansion.
Chuhan-Pole stresses that, while the ‘Africa Rising’ narrative remains strong, the fall in commodity prices, the slowdown in Chinese growth and the expectation of rising interest rates will pose a challenge for African economies.
Nevertheless, the bank’s 2016 and 2017 forecasts are premised on some recovery in commodity prices, as well as a rise in infrastructure spending as governments ease back on fiscal consolidation.