The International Monetary Fund (IMF) has sent a warning to South Africa over the slow pace of economic recovery post-pandemic. It has pointed a finger at policy uncertainty, embattled power utility Eskom, and a wide range of other issues that pose a critical risk.
IMF says the country’s economy is expected to grow by less than 2% this year.
Max Alier, IMF resident representative in South Africa says that the country was stuck in a low level of economic growth, high level of unemployment, private investment had lost dynamism, poverty increased and inequality widen even before the pandemic hit, however, it exacerbated the situation.
Alier says that the IMF is concerned the situation with energy security is a major concern for South African businesses who have to live with recurrent episodes of load-shedding and the bottlenecks in the infrastructure certainly affect the competitiveness in the economy and believe these are structural stumble blocks that limit the capacity for the economy to grow and generate jobs and help the public finances.
IMF believes it is a priority to tackle these issues and make the economy more productive to attract private investment to boost economic growth and help in the fronts of poverty and inequality, according to Alier.
South Africa could achieve IMF’s projection but like any economic projection there are risks, Alier says adding that the downside is a result of the uncertainty brought by the pandemic and the potential future waves of COVID.
Also, the global economy is going to change, global financial conditions may tighten faster than expected as a result of faster than projected inflation in advanced economies, Alier explained.
On the upper hand, if structural reforms are accelerated it could send positive signals, and help in the investment front, he added.
IMF projects that South Africa’s economy will grow by 1.9% this year.
