THE International Monetary Fund (IMF) has significantly slashed South Africa’s economic growth forecast to 2% for 2013 from a 2.8% outlook in April, its latest World Economic Outlook report showed on Tuesday.
This is now more in line with local forecasts. Most local institutions have lowered their outlooks following much weaker than expected gross domestic product (GDP) growth in the first quarter.
Growth is expected to come in at 2.9% in 2014, down from an earlier forecast of 3.3%, the IMF report showed.
"Growth in sub-Saharan Africa will be weaker, as some of its largest economies (Nigeria, South Africa) struggle with domestic problems and weaker external demand," the report said.
South Africa’s domestic problems include wildcat strikes in the mining sector and falling commodity prices.
The IMF said that weaker growth prospects and new risks raised new challenges to global growth and employment, and urged policymakers to "increase efforts to ensure robust growth."
It trimmed its global growth forecasts for 2013 to 3.1% from an earlier forecast of 3.3%, "driven to a large extent by appreciably weaker domestic demand and slower growth in several key emerging market economies, as well as by a more protracted recession in the euro area".
The global lender sees global growth at 3.8% in 2014, down from an earlier forecast of 4%.
Growth forecasts have also been lowered in most parts of the world, including key export markets for South Africa including the eurozone, China and the US.
The euro area is still expected to continue in recession for the rest of 2013, contracting at a rate of 0.6%.
Growth prospects for 2014 have also been downwardly revised to 0.9% from 1.1% before.
"Policies to reduce financial market fragmentation, support demand, and reform product and labour markets are also crucial for stronger growth and job creation," the IMF said in reference to the eurozone.
Growth forecasts for South Africa’s biggest trading partner, China, were trimmed to 7.8% in 2013 from 8.1% before.
US growth is likely to be recorded at 1.7% in 2013, rising to 2.7% in 2014. These forecasts were both downwardly revised by 0.2 percentage points.
The IMF said the higher growth projections for 2014 were based on an expected solid private demand.
"Private demand should remain solid, given rising household wealth owing to the housing recovery and still supportive financial conditions," the global lender said.
Emerging markets will continue to lead global economic growth, the IMF figures suggested.
Emerging market and developing economies are seen expanding by 5% in 2013 and 5.4% 2014, while advanced economies are forecast to grow 1.2% in 2013 and 2.1% in 2014.
The forecasts of both emerging market and advanced economies were slightly downwardly revised.