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IMF cuts SA 2016 growth forecast to 0.1% from 0.6%

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The International Monetary Fund cut its forecast for economic growth in South Africa this year to 0.1% from 0.6%.

Gross domestic product in Africa’s most-industrialised economy will probably expand 1.1% in 2017, the Washington-based lender’s mission chief for South Africa, Laura Papi, and senior economist, Yi Wu, wrote within a opinion piece published in Johannesburg-based Day newspaper on Thursday. Which is to be the slowest rate of growth since a 2009 recession.



The low growth forecasts mean “the economy is just not maintaining the interest rate of population growth, which can be 1.7%,” Papi and Yi wrote. “If these projections take place, South Africa’s per capita income buy will probably be precisely what it what food was in 2010.”

South Africa would need to implement structural reforms to increase the economy, which include more flexible labour laws, to prevent its credit score being cut to junk, S&P Global Ratings said on June 3 in the event it affirmed the continent at the cheapest investment-grade level. The economy contracted 1.2% while in the 11 weeks through March as mining and farming output slumped as a result of low mineral prices as well as the worst drought in additional than only a century. ?

Governance Concerns

Changes within the finance minister portfolio in December, when President Jacob Zuma replaced Nhlanhla Nene which has a little-known lawmaker then reappointed Pravin Gordhan four days later into the position he held from 2009 until 2014, and various political developments, have heightened governance concerns and policy uncertainty, the IMF said.

The Reserve Bank has grown its benchmark repurchase rate by 125 basis points to 7% since last July mainly because it sought to run inflation back to its 3% to 6% target band. Although the central bank said it’s responsive to the result of upper rates on growth, it can remain focused entirely on its mandate of price stability, Deputy Governor Daniel Mminele said on Wednesday. The bank account said in May the economy will expand by 0.6% this year and the National Treasury forecast continuing development of 0.9% in February.

The decline in website forecast “doesn’t really spell fantastic news for that ratings outlook, because young children and can ratings agencies have consistently flagged deficiency of rise in the economy among the key ratings risks for South Africa,” Jeffrey Schultz, a senior economist at BNP Paribas Securities, said by telephone from Johannesburg on Thursday. “The Reserve Bank probably should be thinking to itself it need to be nearing no more its hiking cycle.”

The IMF can be due to release its full Article 4 Staff directory of Africa at 3:45pm on Thursday.

? 2016 Bloomberg

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