The World Bank has fallen in line with dominant economist sentiment and slashed SA’s economic growth outlook to 0.6% in 2017, down 0.5 percentage points from its January forecast of 1.1%.
The bank cited the deterioration in investor confidence following recent credit rating downgrades and “higher-than-anticipated” policy uncertainty as reasons for its revision.
The decision by the bank, outlined in its report Global Economic Prospects June 2017 is hardly surprising and comes after the Reserve Bank also cut the country’s 2017 growth forecast to 1% in May from 1.2%.
Most major banks have also revised their forecasts down. FNB further revised its forecast of 0.7% to 0.6%.
The IMF revised its forecast up to 1% from 0.8% in May, basing its decision on the end of the worst drought in more than a century that is expected to lift agricultural production while rising commodity prices would boost the mining sector.
The Treasury predicted growth of 1.3% in 2017.
GDP figures due to be released on Tuesday by Statistics SA will provide insight into SA’s growth in the first quarter and may signal whether the World Bank or the IMF’s projections are accurate.
The consensus among economists is that SA will narrowly miss a recession (characterised by two successive quarters of negative growth) after a contraction of 0.3% in the fourth quarter of 2016.
FNB economist Mamello Matikinca said they expected the data would show the country narrowly averted a technical recession, “but we remain bearish on growth”.
Matikinca expects 0% growth in the first quarter, held back by weak manufacturing, retail and transport numbers.
The World Bank’s report said that “political uncertainty and low business confidence are weighing on investment” while increased uncertainty ahead of “key elections” also posed a risk to SA’s recovery.
Despite the World Bank’s negative view on growth in the country, it forecasts global economic growth to strengthen to 2.7% in 2017.
Growth in emerging markets and developing economies is projected to pick up to 4.1% in 2017 from 3.5% in 2016.
Meanwhile, Finance Minister Malusi Gigaba says the National Development Plan is the key to economic growth.
SA needed large-scale industrialisation “in the secondary sectors to grow and create jobs and wealth on a sustainable basis in pursuit of the radical economic transformation we seek to achieve inclusive growth”, Gigaba said.
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