World Bank forecasts hope for South Africa’s economy

April 11, 2018

The World Bank on Tuesday forecast hope for South Africa’s economy but with warned that growth potential would remain weak without concerted efforts to reduce inequality and stimulate competition.

The bank sees gross domestic product up by 1.4 per cent from its Sept. 2017 forecast of 1.1 per cent.

This is supported by improved business and consumer confidence after Cyril Ramaphosa replaced Jacob Zuma as president of the country in February.

“But the country will struggle to raise growth much beyond two per cent without policy interventions to improve skills among the poor and tackle monopolies,’’ it said.

“There has been a smooth and seamless political transition, which is important, and there have been gains in the trust of people and businesses.

“That said, inequality, poverty and unemployment are big challenges. South Africa is the most unequal economy in the world today,” ,” World Bank Country Director for South Africa, Paul Noumba Um, told a news conference in Johannesburg.

The bank’s predictions are more pessimistic than those of the finance ministry, which is targeting growth of at least 1.5 per cent in 2018, and ratings agencies such as S&P Global.

The World Bank forecast growth of 1.8 per cent next year and 1.9 per cent in 2020, but said that would be insufficient to meaningfully reduce poverty or dent the 27 per cent unemployment rate.

Under Zuma’s watch, unemployment rose and the economy stagnated as businesses were reluctant to invest, and South Africa has consistently failed to achieve the government’s growth target of five per cent.

Mr Sebastien Dessus, World Bank’s Programme Leader for South Africa, said reaching five per cent growth was not realistic in the near term.

He highlighted better education, fighting corruption and restoring policy certainty in mining as factors which could boost the economy.

Noumba Um said that if the country could achieve three per cent growth, “that will be a significant achievement’’.