IMF sustains South Africa’s growth outlook, but points to downside risks
The International Monetary Fund (IMF) has sustained its 2% growth outlook for South Africa for 2015 in its World Economic Outlook Update, despite a modest downward revision, to 3.3% from 3.5%, to its global growth forecast.
The projection for South Africa’s 2016 growth has also been held at 2.1%, which remains well below the country’s National Development Plan growth aspiration of over 5% a year.
The South African economy grew by only 1.3% in the first quarter, when electricity supply problems and drought weighed on manufacturing and agricultural output respectively.
However, most economists still expect the economy to grow by about 2% this year, while warning that the outlook could be negatively affected by any protracted gold-sector strike, a further rise in fuel prices, or an increase in electricity load-shedding.
The IMF has modestly trimmed its 2015 growth outlook for sub-Saharan Africa to 4.4% from 4.5%, but has maintained its 2016 projection for the region at 5.1%.
However, the IMF warns that the risks to global economic activity remain “tilted to the downside”, with growth in emerging market and developing economies projected to fall from 4.6% in 2014 to 4.2% this year, before picking up to 4.7% in 2016.
“Disruptive asset price shifts and a further increase in financial market volatility remain an important downside risk,” the IMF states.
Other risks, the IMF says, include greater difficulties in China’s transition to a new growth model, as illustrated by the recent financial market turbulence, lower commodity prices, lower potential output growth and spillovers to economic activity from increased geopolitical tensions in Ukraine, the Middle East and parts of Africa.
The IMF says developments in Greece have not yet resulted in any significant “contagion” and that “timely” policy action should help manage such risks should they materialise.
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