Finance Minister Malusi Gigaba. Picture: MOELETSI MABE
Finance Minister Malusi Gigaba. Picture: MOELETSI MABE

The IMF has slashed its 2017 growth forecast for SA, bringing it in line with Reserve Bank and World Bank estimates.

The revision comes ahead of the mid-term budget policy statement on October 25, which will be closely watched by credit ratings agencies. Finance Minister Malusi Gigaba is expected to cut the Treasury’s 1.3%, which was forecast in the budget earlier in 2017.

After revising growth up to 1% from a previous 0.8% in its July World Economic Outlook, the IMF has now dropped its forecast for SA to 0.7%. In the September World Economic Outlook, the fund said: "In SA, growth is projected to remain subdued at 0.7% in 2017 and 1.1% in 2018, despite more favourable commodity export prices and strong agricultural production, as heightened political uncertainty saps consumer and business confidence."

Nascence economist Xhanti Payi said: "The World Bank has already done the same, so it’s not unexpected. Everyone sees that we’re struggling with slow growth and weak investment, so this was inevitable.

"But credit ratings agencies have said they are watching our growth and whether we’ll be able to raise the revenue and keep the deficit low."

In September, Moody’s vice-president and senior sovereign analyst Zuzana Brixiova said that SA was stuck in a low-growth trap and was at risk of another downgrade if the government did not implement structural reforms.

Credit ratings agencies Fitch and S&P Global have also flagged slow economic growth as a concern.

While the Treasury previously indicated it expected the economy to grow 1.3% in 2017, Gigaba has hinted that this is likely to be revised in the mid-term budget speech.

Econometrix economist Azar Jammine said: "The IMF has come in line with the Reserve Bank, which is now at 0.6%.

"Government has also alluded to a lower forecast of around 0.6% or 0.7%."

He said that unless there were serious structural reforms, there was a high chance of another downgrade but it would probably not be in November, when the next reviews were scheduled. Instead, ratings agencies would pay close attention to the December elective conference and the change of leadership in the ANC, he said.

Argon Asset Management economist Thabi Leoka said: "There are a lot of risks to SA’s credit rating. Growth is an issue. If the mid-term budget does not begin solving the growth problem, that’s a huge risk."

While Leoka does not expect a downgrade in November, she said the risks remained high.

At the end of September, the World Bank halved its growth outlook for SA, citing dwindling productivity as a major threat to growth. GDP growth was revised down to 0.6% for 2017, from a 1.1% forecast in January.

While the Bank revised its growth forecast up from 0.5% to 0.6% in September, this is significantly down from the previous projection of 1%.

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