The International Monetary Fund (IMF) says South Africa faces mounting challenges.
The International Monetary Fund has concluded its Article IV assessment on South Africa, warning that the country faces near-zero economic growth in 2023, and conditions are likely to deteriorate further without much-needed reforms.
“Business and consumer confidence and investor sentiment remain weak, and the sovereign spread for South Africa remains higher than the pre-pandemic level. The average employment level in 2022 was still about 5% lower than in 2019, threatening social cohesion,” it said. The fiscal deficit has continued to narrow, reaching 4.2% of GDP in FY2022/23, from 4.8% in FY2021/22, thanks to buoyant revenue and expenditure restraint.
Unfortunately, this growth level would be too low to create enough jobs to absorb the new labour market entrants, it said. In addition to this, the fiscal position is projected to deteriorate due to weakening mineral revenue, the Eskom debt relief arrangement, wage bill pressures, and rising debt service.Headline inflation is expected to return to the midpoint of the target range by the end of 2024. The current account deficit is projected to deteriorate to about 2.5% of GDP in the near term.
“This should be supported by reforms to the fiscal framework, procurement system, and public investment management,” it said.
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