SA's economic growth projected to be 0.1 percent this year: IMF

South Africa's economic growth is projected to slow to 0.1 percent in 2016, with a weak recovery envisaged from 2017 (1.1 percent), the International Monetary Fund (IMF) said on Thursday.

Growth in the country is estimated to approach 2-2½ percent in the outer years, as shocks dissipate and new power plants are completed, the IMF said in a report.

"South Africa's economic outlook is sobering with considerable downside risks," the report said.

The unemployment rate could rise further over the medium term. The current account deficit is forecast to narrow slightly in 2016, but rise to 4¾ percent of GDP in 2017-18 on weaker terms of trade, according to the report.

Inflation is projected at 6.7 percent in 2016 before easing to 5.6 percent by end 2017.

The IMF issued the report after concluding consultations with South Africa on the economic situation in the country.

The report noted that South Africa has made impressive economic and social progress in the past two decades, yet deep-rooted structural problems, infrastructure bottlenecks, skill mismatches, and harmful insider-outsider dynamics are holding back growth and exacerbating unemployment and inequality.

South Africa's vulnerabilities are elevated. Despite a large currency depreciation and not withstanding some correction, South Africa's current account deficit remains among the highest in emerging markets, the report said.

A combination of rising government debt, albeit at a slower rate, low growth, financially weak state-owned enterprises, and spending pressures has increased vulnerabilities in the real and fiscal sectors, said the report.

Most private corporations'balance sheets remain strong, but financial indicators signal some deterioration ahead.

Headline inflation at 6.1 percent in May 2016 was above the South African Reserve Bank's (SARB) 3-6 percent band, mostly due to base effects of fuel prices and rising food prices caused by drought, according to the report. Endit