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IMF delivers SA a vote of confidence

The IMF’s latest World Economic Outlook say the onset of a new political leadership in SA has reduced policy uncertainty
The IMF has given SA a vote of confidence, revising its growth projections, but also warned that progress would be slow unless structural reforms were implemented.

The IMF expects economic growth to strengthen to 1.5% in 2018 and to 1.7% in 2019. These estimates come after the IMF in January slashed growth forecasts for both 2018 and 2019 to less than 1%.

According to the IMF, the medium term outlook is subdued, with growth expected to stabilise at 1.8% over 2020–23. Its new projections are in line with the World Bank and the Treasury’s estimates.

The World Bank expects growth to accelerate to 1.4% in 2018 and 1.8% in 2019, while the Treasury forecasts growth of 1.5% in 2018 and 1.8% in 2019.

While expected growth remains subdued at less than 2%, the IMF’s latest World Economic Outlook released says the onset of a new political leadership in SA has reduced policy uncertainty.

“Business confidence is likely to gradually firm up with the change in the political leadership, but growth prospects remain weighed down by structural bottlenecks.

“Advancement of the outstanding reforms is critical for reinvigorating economic growth and making it more inclusive.”

The Department of Planning, Monitoring and Evaluation said that without stronger economic growth SA would fall short of the goals set out in the National Development Plan (NDP). The NDP aims to eliminate poverty and reduce inequality by 2030. This calls for sustained growth of 5.4% and a 6% decrease in unemployment by 2030.

The reforms recommended by the IMF include improving infrastructure; reducing barriers to entry in key sectors; improving the efficiency of government spending in order to attract investment; and promoting growth and job creation.

“Economic growth and unemployment rates targets are still lagging behind. For the country to achieve the NDP objectives
we need to get the economy back on track.

“The country needs to attract investments to boost economic capacity and to move to an economic trajectory that will enable us to achieve the objectives for poverty and inequality reduction Ultimately this will enable the country to achieve the NDP objectives in the next 12 years.”

Ramaphosa is looking to attract $100bn in investment over the next five years by revitalising the relationship between the government and business through special investment envoys.

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