IMF cuts South Africa growth forecasts

The International Monetary Fund (IMF) has cut its 2022 growth forecasts for South Africa on the back of a softer-than-expected second half in 2021 and a weaker outlook for investment, as business sentiment remains subdued.

In its global outlook report published on Tuesday (26 January), the global monetary group said that it now expects South Africa’s economy to grow by 1.9% in 2022. This is down from its October forecast of 2.2%.

The IMF expects growth to further slow to 1.4% in 2023. On a more positive note, the group estimates that South Africa’s GDP grew by 4.6% in a rebound from 2020’s Covid-19 pandemic and lockdown losses.

The twin pressures of tighter Covid-19 lockdown restrictions and a spate of civil disorder in July led to the economy contracting in the third quarter of 2021, Statistics South Africa said on 7 December.

After recording four consecutive quarters of positive growth, real gross domestic product (GDP) slumped by 1.5%, eroding some of the economic gains the country has made since the severe impact of Covid-19 in the second quarter of 2020. Statistics South Africa is expected to publish its Q4 and full-year GDP results on 8 March 2022.

The lower than expected growth is in line with other country revisions, as the global economy enters 2022 in a weaker position than previously expected.

“As the new Omicron Covid-19 variant spreads, countries have reimposed mobility restrictions. Rising energy prices and supply disruptions have resulted in higher and more broad-based inflation than anticipated, notably in the United States and many emerging market and developing economies,” the IMF said.

“The ongoing retrenchment of China’s real estate sector and slower-than-expected recovery of private consumption also have limited growth prospects.”

The IMF said global growth is expected to moderate from 5.9% in 2021 to 4.4% in 2022—half a percentage point lower for 2022 than in the October World Economic Outlook (WEO), largely reflecting forecast markdowns in the two largest economies.

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IMF cuts South Africa growth forecasts