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IMF paints gloomy picture of S. African economy

Xinhua, June 24, 2015 Adjust font size:

Growth and job creation in South Africa remain lacklustre, however external vulnerability has declined somewhat, the International Monetary Fund (IMF) said on Tuesday.

Downside risks to the growth forecast for South Africa include electricity shortages, regulatory uncertainties, renewed labour tensions, volatility in global financial markets and slower global growth, the IMF said in a report.

The IMF's forecast for growth in South Africa is two percent in 2015-16, rebounding to 2.8 percent over the medium term, predicated on increased energy availability.

The IMF also predicted that debt should stabilize at about 50 percent of GDP by 2019/20, which is lower than the 56 percent of GDP projected in the 2014.

The improvement in the terms of trade has temporarily lowered inflation and somewhat reduced external vulnerability, the IMF said.

It projected that the current account deficit would narrow to 4.8 percent of GDP in 2015 from 5.4 percent in 2014 due to lower oil prices and the fact that the South African balance of payments has shown resilience to the appreciation of the U.S. dollar.

"The IMF growth projections are consistent with our estimates of two percent in 2015 and three percent by 2017," the South African National Treasury said in response to the report.

"Government has acknowledged that there are domestic factors that are constraints to growth and is working at addressing these in its programmes.

"Many of the risks that have been identified by the IMF are addressed in the National Development Plan which reflects efforts to address growth and redistribution, expanding output and incomes and build a more inclusive and equal society," the Treasury said.

It said measures are underway to address the electricity constraints, by investing in critical infrastructure, stepping up maintenance to ensure reliability of supply, renewing existing cogeneration agreements and entering into new ones with private firms, and expediting the completion of new power stations. Endi