South Africa\u2019s economic growth is expected to slow to 1.9% in 2022, says finance minister Enoch Godongwana.<\/p>\n
The minister said this in the National Assembly on Wednesday while delivering the 2022 Medium Term Budget Policy Statement (MTBPS) at the Cape Town City Hall.<\/p>\n
Addressing Members of Parliament, Godongwana said this level of growth is \u201ctoo low\u201d to support the country\u2019s developmental goals. \u201cAccordingly, we must take action to put our economy on a higher growth trajectory,\u201d he said.<\/p>\n
The project is a significant decline from 2021\u2019s 4.9%. The forecast, said the National Treasury, is in response to global and domestic shocks. Growth is projected to average 1.6% from 2023 to 2025.<\/p>\n
By the same token, Treasury forecast headline inflation of 6.7% for 2022. It projects that inflation would decline to 5.1% in 2023. High domestic food inflation and elevated fuel price were key sources of inflationary pressure. Food inflation this year averaged 8.5%, driven by rising bread, cereals and meat prices.<\/p>\n
Treasury said implementing structural reforms, especially in the energy sector, remains crucial to improve the economy\u2019s productive capacity and competitiveness.<\/p>\n
\u201cThe recovery in economic activity that began in 2021 was driven by a strong rebound in global economic activity, high commodity prices and easing Covid-19 restrictions. The scarring impact of the pandemic on employment and investment decisions will likely weigh on the recovery over the medium term. Investment remains well below pre-pandemic levels,\u201d it said.<\/p>\n
In this regard, the country\u2019s economy grew by 1.4 % in the first half of 2022 compared with the first half of 2021.<\/p>\n
\u201cReal gross domestic product (GDP) grew more than expected in the first quarter of 2022, with output returning to pre-pandemic levels. However, a deteriorating global environment, flooding in KwaZulu-Natal and the Eastern Cape, industrial action in the electricity and mining sectors, and protracted and intense power cuts resulted in a broad-based contraction across most sectors during the second quarter, reads the MTBPS.<\/p>\n
\u201cThe third quarter was marked by frequent and prolonged power cuts, which significantly disrupted economic activity.\u201d<\/p>\n
The National Treasury in the MTBPS said the supportive external environment and commodity price levels that contributed to a faster than-expected recovery from COVID-19 lows were dissipating.<\/p>\n
Risks<\/strong><\/p>\n In addition, some of the risks outlined in the 2022 Budget had materialised, including slower global growth from supply chain disruptions and stringent lockdown restrictions in China, surging inflation and tighter monetary policy stances.<\/p>\n \u201cSouth Africa\u2019s structural economic constraints \u2013 including unreliable electricity supply, high levels of market concentration, inefficiencies in network industries and a high cost of doing business \u2013 limit the rate at which the economy can grow and create jobs.\u201d<\/p>\n Treasury said these longstanding impediments to growth have been aggravated by recent shocks, threatening to move the economy further away from the goals of the National Development Plan.<\/p>\n \u201cRecent events underline the importance of rapidly implementing the economic recovery plan, including through Operation Vulindlela, to narrow the gap between South Africa\u2019s poor economic outcomes and its aspirations,\u201d it said.<\/p>\n A draft National Treasury review of the country\u2019s macroeconomic policy since the 2008 global financial crisis has underscored the importance of a clear and stable macroeconomic framework, said the department.<\/p>\n These, it said, include a flexible exchange rate, low and stable inflation, and sustainable fiscal policy \u2013 as a foundation for a growing economy. Building on this foundation, rapid implementation of economic reforms was required to boost economic growth.<\/p>\n Since the 2022 Budget Review, progress had been made on important reforms that were expected to support investment and job creation.<\/p>\n
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