IMF Say South Africa’s Economic Growth Will Slow

23 August 2012 17:00 - Which Way to Pay

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IMF Say South Africa’s Economic Growth Will Slow

The International Monetary Fund has said South Africa’s economic growth is likely to slow in 2012 because of weak external conditions and global uncertainty. The IMF said growth in Africa’s biggest economy will likely reach just 2.6% in 2012, cutting its forecasts from the 2.7% seen in May. In a statement the fund said that the country’s “stubbornly high” unemployment rate could become politically and socially unsustainable if the situation is not addressed.

South Africa’s Reserve Bank and the Treasury say expansion will be 2.7% this year. However, Finance Minister Pravin Gordhan has warned he will revise this down in his October review.

The IMF said, “The level of government debt, coupled with the budget deficit suggested fiscal space to cope with future shocks has declined considerably.” It added, “Monetary policy should remain accommodative, especially given the limited fiscal space.” The country's output gap, the difference between actual and potential gross domestic product, would likely remain negative through 2014 and help moderate inflation, allowing the central bank greater room to respond, the IMF said. It warned that the country would not be able to reduce unemployment on a sustained basis without labour market reforms.

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Related Links:
• IMF
Official Statement
• South African Reserve Bank
Central Bank of South Africa

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