World Bank predicts tepid growth for SA in 2019
The global lender expects growth of only 1.3% for the year
SA will be one of the worst performers in sub-Saharan Africa in 2019 with tepid growth of 1.3%, according to the World Bank.
The bank’s annual Global Economic Prospects, released on Tuesday evening, says SA’ growth is substantially lower than the 4.2% projected average of its emerging market peers and the 3.7% projected average for sub-Saharan Africa. The forecast rate is also lower than the Treasury’s prediction of 1.7% for 2019 and the Reserve Bank’s 1.9%.
Lower-than-expected growth will come as a blow to President Cyril Ramaphosa as he comes under pressure to implement reforms to revitalise the economy in an election year.
Despite SA officially emerging from recession in the second half of 2018, growth in 2019 would remain subdued due to a combination of challenges in mining production, low business confidence and policy uncertainty, warned the Washington-based bank.
SA’s economy expanded only 0.9% in 2018, from a previous estimate of 1%. “High unemployment and slow growth in household credit extension are expected to constrain domestic demand in 2019, while fiscal consolidation limits government spending,” says the outlook.
Growth will probably increase to 1.7% in 2020 and 1.8% in 2021, it says. This, however, remains woefully far from the growth needed to make a dent in unemployment.
The National Development Plan (NDP) targets growth of 5.4% a year to cut unemployment and poverty. However, the economy has struggled to breach the 2% mark since 2013, while unemployment has edged closer to the 30% mark.
“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 and investor sentiment improves,” the bank says.
It warns that global growth will slow to 2.9% in 2019, from 3% in 2018 with risks such as softer international trade and investment, elevated trade tensions and substantial financial market pressures in some large emerging market and developing economies.
“Downside risks have become more acute. Disorderly financial market developments could disrupt activity in the affected economies and lead to contagion effects,” warns the Bank.
“Trade disputes could escalate or become more widespread, denting activity in the economies involved and leading to negative global spillovers.”