Picture: REUTERS
Picture: REUTERS

The World Bank has revised SA’s growth forecasts down for this year and next, and has taken a dim view of President Cyril Ramaphosa’s economic stimulus plan.

While the forecasts are higher than those of the Reserve Bank and many analysts, the World Bank now expects growth of 1.0% in 2018, down from 1.4%. Growth forecasts were lowered from 1.8% to 1.3% in 2019, and from 1.9% to 1.7% in 2020.

“Growth is expected to remain subdued in 2019, as domestic demand is constrained by high unemployment and slow growth in credit extension to households, and as fiscal consolidation limits government spending,” the World Bank said in its regional economic outlook for Africa released on Wednesday.

“The higher growth in 2020 reflects the expectation that the government’s structural reform agenda will gradually gather speed, helping to boost investment growth, as policy uncertainty recedes.”

The World Bank also warned that Ramaphosa’s economic stimulus plan will have a limited impact. The plan was announced following the shock statistics that SA had entered a recession for the first time since the global financial crisis.

Ramaphosa’s plan encompasses growth-enhancing reforms; reprioritising public spending to create jobs; setting up an infrastructure fund; improving education and health; and investing in municipal social infrastructure.

“The economic effect of the stimulus plan is likely to be limited, as it mostly consists of already committed public spending. However, planned reforms — including on mining regulation and utility pricing — will improve the business environment and encourage investment,” said the World Bank.

Excluding the region’s three largest economies, Nigeria, SA and Angola, the World Bank expects growth in the rest of Sub-Saharan Africa to continue to rise at a solid pace. Economic growth in Sub-Saharan Africa is estimated to have picked up to 2.7% in 2018 from 2.3% in 2017, barely above population growth. This was revised down from a previous estimate of 3.1%.

“The region’s economic recovery continues but at a slower pace than expected,” said the World Bank. Growth in the region has been slightly dented by a less favourable external environment as global trade and industrial production has lost momentum.