South Africa’s growth rate forecast revised down

The South African Reserve Bank has revised its forecast of GDP growth for 2019 on the back of increased local and international risks.

In its Monetary Policy Committee statement on Thursday (16 January), the central bank revised its forecasts for 2020 to 1.2% (from 1.4%) and 1.6% (from 1.7%) for 2021.

“The MPC assesses the risks to the growth forecast to be to the downside,” said Reserve Bank governor Lesetja Kganyago.

“Escalation in global trade tensions, geo-political risks, further domestic supply constraints and/or sustained higher oil prices could generate headwinds to growth.

“Public sector financing needs have risen, increasing risk premiums and pushing borrowing costs for the broader economy higher. Implementation of prudent macroeconomic policies and structural reforms that lower costs and increase investment, potential growth and job creation, remains urgent.”

The revised forecast comes after the World Bank cut its growth forecast for South Africa to below 1% for 2020 due to Eskom’s load shedding.

It now expects the economy to expand by 0.9% this year. That compares with an estimate of 1% in its Africa Pulse report released in October and is still well below government forecasts.

The bank’s revision comes as Eskom resumes rolling blackouts earlier than expected.

The power cuts threaten to drag on an economy stuck in the longest downward cycle since 1945 and that hasn’t expanded by more than 2% annually since 2013.

The World Bank said it sees GDP growth averaging 1.4% in 2021-22 if President Cyril Ramaphosa’s administration is able to ramp up structural reforms and address policy uncertainty, and if there’s a recovery in public and private sector investment.

Update: a previous version of this article included the claim from Eskom that it produces 95% of South Africa’s electricity. Fact checking group Africa Check has found this to be only 90%. Eskom has since updated the claim, and it has been removed from this article.

Read: Relief for consumers as Reserve Bank cuts rates

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South Africa’s growth rate forecast revised down