The World Bank raised its economic-growth forecast for South Africa because of a sustained recovery in its energy and logistics sectors, while warning that the nation will struggle to achieve a pace of expansion needed to reduce poverty and unemployment.<\/p>\n\n\n\n
The Washington-based lender boosted its gross domestic product growth projection for 2025 to 1.8%, from 1.3% previously, according to its South Africa Economic Update report published on Tuesday. <\/p>\n\n\n\n
The bank expects growth to accelerate to 2% by 2027.<\/p>\n\n\n\n
\u201cSuch recovery, albeit modest, will be driven by improved infrastructure services and a relatively favourable external environment,\u201d it said. <\/p>\n\n\n\n
\u201cDuring this period, inflation is expected to remain under control, allowing a further easing of monetary policy that will encourage banks\u2019 credits to businesses and households and, thus, stimulate economic growth.\u201d<\/p>\n\n\n\n
South Africa\u2019s central bank has lowered its key interest rate by a cautious 75 basis points since September to 7.5% as inflation remains below the 4.5% midpoint of its target range. <\/p>\n\n\n\n
Still, growth at those rates won\u2019t be enough to reduce one of the highest poverty and unemployment rates in the world, the bank said.<\/p>\n\n\n\n
\u201cA 1% increase in GDP growth is expected to generate only 30,000 to 50,000 jobs due to the low employment elasticity to GDP growth in South Africa,\u201d it said. <\/p>\n\n\n\n
\u201cThe poverty and unemployment rates are therefore projected to remain high, above 60% and 30%, respectively, throughout the projection period.\u201d<\/p>\n\n\n\n
An expansion rate of 5% to 6% a year that\u2019s needed to make a dent in those numbers would be difficult to achieve in the short term, the bank said. <\/p>\n\n\n\n
That\u2019s because of \u201cthe structural constraints that continue to impede the development of the private sector and the need for fiscal consolidation.\u201d it said.<\/p>\n\n\n\n
South Africa, where interest payments consume one-fifth of government revenue, will need to reduce the fiscal deficit to 4.6% of GDP from 6% by 2027 to achieve a sustainable public debt trajectory, the lender said. <\/p>\n\n\n\n
That won\u2019t be easy because of the plethora of risks the country faces, including a global trade war, a fragile political coalition, high crime and insecurity, and persistent social tensions, it said.<\/p>\n\n\n\n
The nation\u2019s fiscal consolidation process may also face opposition from labor unions requesting higher wages and state owned-companies such as Transnet and subnational governments needing bailouts.<\/p>\n\n\n\n
Finance Minister Enoch Godongwana will deliver his annual budget speech on 19 February.<\/p>\n","protected":false},"excerpt":{"rendered":"
The World Bank has lifted South Africa’s growth forecast, expecting things to get even better from here on out.<\/p>\n","protected":false},"author":59,"featured_media":770974,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11121],"tags":[21634,2720,4423],"class_list":["post-810255","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-finance","tag-economic-growth","tag-gdp","tag-world-bank"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/810255","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/users\/59"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/comments?post=810255"}],"version-history":[{"count":1,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/810255\/revisions"}],"predecessor-version":[{"id":810256,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/810255\/revisions\/810256"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media\/770974"}],"wp:attachment":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media?parent=810255"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=810255"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=810255"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}