South Africa Cuts GDP Growth Forecast to 2% as Blackouts Weigh

South Africa’s government cut its economic growth forecasts for the next two years due to power shortages.

The estimate for 2015 was lowered to 2 percent from 2.5 percent, while the projection for 2016 was reduced to 2.4 percent from 2.8 percent, Finance Minister Nhlanhla Nene said in his budget speech in Cape Town. Further deterioration in electricity availability could slow growth to 1 percent in 2015, the National Treasury said.

“Electricity constraints hold back growth in manufacturing and mining, and also inhibit investment in housing and raise costs for businesses and households,” Nene said.

Eskom Holdings SOC Ltd., the state-owned utility that provides 95 percent of South Africa’s electricity, started rolling blackouts in November as it took down power plants for maintenance and other facilities failed because of technical faults. Frequent unplanned outages and low plant availability will probably persist for the next three years, the Treasury said on Wednesday. Eskom started almost daily blackouts this month.

The economy expanded 1.5 percent in 2014, the slowest pace since a 2009 recession, after strikes at mines and factories curbed output, the statistics agency said on Tuesday.

Inflation, which slowed to 4.4 percent in January, will probably average 4.3 percent this year and 5.9 percent in 2016, according to the Treasury. The Reserve Bank kept its benchmark repurchase rate unchanged at 5.75 percent at its last three meetings.

“The economic growth outlook is uncertain” and “both weaker growth and rising interest rates are possible over the period ahead,” Nene said.

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