- Lower projection due to policy uncertainty, rate increases
- Sub-Saharan Africa GDP to expand 3% this year, 4% in 2017
The International Monetary Fund cut its forecast for economic growth in South Africa for a second time this year after the central bank raised borrowing costs and as policy uncertainty increased.
Gross domestic product in Africa’s most-industrialized economy will probably expand 0.6 percent in 2016, compared with January’s estimate of 0.7 percent and last year’s 1.3 percent growth, the Washington-based lender in its World Economic Outlook report on Tuesday. The IMF lowered its projection for 2017 to 1.2 percent from 1.8 percent.
South Africa’s expansion last year was the lowest rate since a 2009 recession as the economy struggled to cope with a plunge in metal prices, fueled by a slowdown in its biggest export market, China, and the worst drought in more than a century. The central bank raised its benchmark rate twice this year to 7 percent to try tame inflation that surged to 7 percent in February.
The forecast of weaker growth is due to “lower export prices, elevated policy uncertainty, and tighter monetary and fiscal policy,” the IMF said.
President Jacob Zuma’s decision in December to replace Nhlanhla Nene as finance minister with a little-known lawmaker surprised investors, adding to uncertainty about the nation’s future economic policy. The president reappointed Pravin Gordhan four days later in the position he held from 2009 until 2014 after pressure from political and business leaders. The Treasury is seeking to contain spending and debt even as growth slows, with the nation’s credit-rating at risk of being downgraded to junk.
The IMF cut its 2016 growth forecast for sub-Saharan Africa by 1 percentage point to 3 percent and reduced next year’s estimate to 4 percent from 4.7 percent. The World Bank on Monday lowered its 2016 projection for the region by 0.9 percentage points to 3.3 percent.