The International Monetary Fund (IMF) has warned that South Africa will face lackluster growth despite a faster-than-expected recovery from the Covid-19 pandemic. In a press release published on Friday, February 11, the Bretton Woods institution forecasts that growth will rebound to 4.6% in 2021, after contracting by 6.4% in 2020.
However, the monetary institution was optimistic. Believing that the economic recovery should increase in the context of low vaccination rates and foreign travel bans decided because of the Omicron variant. Despite this positive note, the IMF maintains that the economic recovery remains fragile because it has been accompanied by a worsening of unemployment (34.9%), low bank credit to the private sector and weak private investment.
The IMF notes that “despite the rebound in growth, poverty and inequality have not shown signs of improvement”. Adding that “in this context, macroeconomic fundamentals have weakened and vulnerabilities have increased”.
Regarding the budget deficit, the organization reports that it climbed to 9.7% of GDP in 2020, before falling to around 8.4% in 2021. For its part, public debt reached almost 70% of the GDP in 2021.
In its outlook, the IMF indicates that South Africa will see some recovery in growth in the short term, but will remain lackluster in the medium term. According to its forecast, growth should reach 1.9% in 2022, before falling to 1.4% in the medium term. A situation due to structural constraints to investment, current political uncertainty and high public debt, hampering job creation.