The IMF cut SA’s growth forecast for 2022 slightly, citing “a softer-than-forecast” second half of 2021 and a subdued outlook for business investment.
While the forecast change is hardly a game-changer and leaves the fund’s projections not far from those of the government, which expects GDP to average less than 2% over the next three years after a strong rebound from a slump in 2020 that was the biggest in a century, it’s the latest to point to the cost of the violence and looting that engulfed the country in July 2021.
The period under review also included the winter months in which SA, before the wide-scale availability of Covid-19 vaccines, was hit by a devastating wave of the coronavirus that led to a tightening of restrictions.
The Washington-based organisation said that SA’s economy is expected to grow by 1.9% in 2022, compared with a previous prediction of 2.2% from October. It expects the economy to have rebounded by 4.6% in 2021, after declining 6.4% in the wake of the Covid-19 outbreak and lockdowns the previous year. With base effects from that 2020 drop, the economy is then seen underperforming by almost all analysts, both in the public and private sector.
The IMF expects the economy to expand by 1.4% in 2023. Its forecast compares to the SA Reserve Bank’s expectation that growth will slow to 1.7% in 2022, and then accelerate slightly to 1.8% in 2023. The Bank on Tuesday started a three-day policy meeting in which it is likely to update its forecasts for growth and inflation. Analysts expect it to raise its benchmark interest rate to 4%.
“SA’s growth forecast is downgraded in light of a softer-than-expected second half in 2021 and a weaker outlook for investment as business sentiment remains subdued,” the IMF said. Local surveys have painted a similar picture for business sentiment amid uncertainty about the government’s ability to institute reforms in the face of infighting within the ANC and prolonged worries about Eskom’s ability to keep the lights on.
SA was not the only country to suffer a downgrade with the IMF less optimistic about the global economic recovery in the face of the emergence of the Omicron variant of Covid-19 late in 2021, as well as concerns that an inflation spoke in western economies that is prolonged will prompt tighter monetary policy.
In its latest economic outlook, the IMF said it estimated that global GDP expanded 5.9% in 2021, and is pencilling in a moderation to 4.4% in 2022, which is about half what it predicted when it released its October 2021 World Economic Outlook.
“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,” the IMF said. “Rising energy prices and supply disruptions have resulted in higher and more broad-based inflation than anticipated, notably in the US.”
China’s growth rate was seen slowing due to the “ongoing retrenchment” of its real estate sector. Faster inflation also saw it downgrade prospects for Brazil, which has implemented aggressive interest-rate increases in response.
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