JOHANNESBURG (Reuters) – South Africa’s economic recovery remains fragile and growth is expected to hold below 2% in the medium term because of policy uncertainty, high public debt and constraints to investment, the International Monetary Fund (IMF) said on Friday.
In a statement issued at the end of discussions with South Africa, the IMF said the country’s recovery from the COVID-19 pandemic had been faster than expected, but its durability remained uncertain.
South Africa’s National Treasury responded by saying it was “somewhat more optimistic” than the IMF on the medium-term growth outlook, seeing a gradual recovery in investment and confidence.
“The National Treasury acknowledges the difficult juncture South Africa is at,” it said in a statement, adding it was committed to placing public debt on a declining path and reducing budget deficits.
The IMF forecasts South Africa’s economic growth at 1.9% in 2022 after an estimated 4.6% rebound in 2021, but sees it easing to 1.4% in the medium term. The National Treasury did not give its latest growth forecasts in its Friday statement.
“The economic recovery is deemed fragile, as it was accompanied by worsening unemployment, weak bank lending to the private sector and anaemic private investment. Despite the growth rebound, poverty and inequality did not show signs of improvement,” the IMF said.
IMF directors commended the government for a strong policy response to the pandemic but outlined a variety of areas requiring improvement. It said the looming budget on Feb. 23 provided an opportunity for concrete measures to contain public sector wages, rationalise bailouts of state companies, streamline tax expenditure and better target education subsidies.
(Reporting by Alexander Winning; Editing by Raissa Kasolowsky)