Pretoria – South Africa remains positive about its prospects for future economic growth, despite the prevailing challenges, says National Treasury.
The assertion comes as the International Monetary Fund (IMF) published its Article IV consultation with South Africa on Thursday. In the document, the IMF cuts South Africa’s growth to 0.1%, a downward revision from the January projection of 0.7%.
However, National Treasury’s forecast is more positive compared with the IMF.
“In the immediate term, we expect growth and employment to be supported by several structural reforms and targeted government interventions, as guided by the National Development Plan and the Nine-Point Plan.
“Collaborative efforts by government and the private sector aimed at co-investments in infrastructure, supporting small, medium and micro-sized enterprises (SMMEs) and finding sector specific interventions are expected to further improve growth prospects,” said Treasury.
The report notes that the South African economy remains constrained by deep-rooted structural impediments, which, together with rising policy uncertainty, weaken growth and employment prospects.
External risks to South Africa also emanate from further shocks from China, heightened global financial volatility and lower global growth.
In the outer years, the IMF expects growth to rebound to 1.1% in 2017 and 2% in 2018. The IMF also predicts elevated fiscal and current account deficits of 3.7% and 4.1% of Gross Domestic Product respectively for 2016.
The IMF highlighted that domestic risks to South Africa’s growth include developments perceived to damage confidence, the realisation of state owned entities’ contingent liabilities and a downgrade in the sovereign credit rating to speculative grade.
“We recognise, as articulated in the IMF report, that a comprehensive package of structural reforms is necessary to increase growth, create jobs and lower income inequality. An IMF/G20 guiding framework for structural reforms recommends that emerging market economies should focus on fiscal reforms, business regulations, labour market, infrastructure, banking/capital markets and product market regulations,” said Treasury.
The country’s structural reforms implementation package is anchored on the Nine-Point Plan, which entails resolving the energy challenge, revitalising agriculture and the agro-processing value chain as well as encouraging private sector investment, among others.
Through the Nine-Point Plan, the Departments of Public Enterprises and Energy are resolving the energy challenge. Deputy President Cyril Ramaphosa is also leading government, labour and business at the National Economic Development and Labour Council (Nedlac) on discussions on various labour reforms, including codes of good practice and national minimum wage.
“As a country, we will use these positive developments and the contributions of partners such as the IMF to work even harder together to move South Africa forward,” said Treasury.
The IMF, which holds bilateral discussions with every member country annually, held consultations with South Africa between 18 April and 4 May 2016.
The consultations are held to assess the member country’s economic developments and policies.
Cabinet on 22 June 2016, said National Treasury had considered and noted the IMF report. – SAnews.gov.za
