IMF’s New Economic Forecast Disfavours Nigeria As S/Africa Gets Ratings Boost
Against its earlier forecast that both Nigeria and South Africa’s economies will grow at 0.8% in 2017, the International Monetary Fund (IMF) has said South Africa’s economy will grow at a faster pace instead.
IMF predicts that, for the fiscal year of 2017, the economy of South Africa will see an improved growth of 1% due to an end in the country’s historic drought.
This, the IMF said after its Article IV consultation with South Africa.
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The IMF staff team, led by Paolo Mauro, had visited Pretoria, Johannesburg, and Durban from May 3 to May 16, after which it came up with the forecast.
“Following last year’s near-stagnation, there are signs that a modest improvement in the pace of economic growth is underway. The rate of real GDP growth is projected at 1 percent in 2017,” said the IMF team in a statement.
“The main factors underlying the pickup in economic activity this year are a resumption of solid agricultural production as the drought abates, and an increase in mining output prompted by a moderate rebound in the prices of South Africa’s commodity exports.
“The pace of recovery this year and the next is unlikely to prevent a further increase in unemployment and a continued decline in per capita incomes.”
The IMF said the country will have to battle “declining business and consumer confidence and rising impatience with longstanding inequalities” by “reigniting growth and rendering it more inclusive”.
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“Under the current stance of monetary policy, headline inflation is expected to return only somewhat below 6 percent in the second half of 2017 and in 2018.
“In line with the inflation targeting framework, it would thus be appropriate for policy rates to remain on hold, and for the central bank to stand ready to increase rates if inflation expectations were to rise.
“With limited room for stimulus through macroeconomic policies, the priority to stimulate economic growth and job creation rests with structural reforms, notably in product and service markets and in the labor market.
“The focus should be on sectors that provide crucial inputs for most firms in the economy, such as power generation, telecommunications, transportation, and financial services for small-and medium-sized enterprises,” said IMF.
