IMF slashes S.Africa's growth forecast - CNBC Africa

IMF slashes S.Africa's growth forecast

Special Report

by Trust Matsilele 0

Sandton is one of South Africa's economic hubs. PHOTO: Fxguide

The international body left the country's 2015 estimates unchanged.

Meanwhile, sub-Saharan Africa’s growth projection has remained unchanged for 2014 with a slight growth in 2015 by 0.2 per cent to six per cent.

South Africa has been going through a marathon of strikes across industries with the platinum sector having accounted for most of the decline in economic growth prospects.

The IMF’s global growth forecast also dropped by 0.3 per cent comparable to the April projections and at four per cent for 2015.

The International Monetary Fund (IMF) says, even though recovery continues at an uneven pace, downside risks remain.

According to IMF, global growth decelerated more than expected in the first quarter of 2014, largely because of temporary setbacks, including a sharp correction to an earlier inventory build-up and the effects of a harsh winter on domestic demand in the United States.

(WATCH VIDEO: Prospects for global growth)

The IMF added that growth disappointed in China as policies were tightened to dampen credit growth and housing market activity.

“Growth moderated in other emerging markets due to softer external demand and also because of slower-than-expected investment growth.”

The World Economic Outlook update estimates that global growth will rebound as the temporary constraints recede and recent policy actions to support expansion gain ground.

Commenting on downside risks, the IMF said geopolitical tensions have risen as those related to Ukraine are still alive and new risks have emerged in the Middle East.

(WATCH VIDEO: The impact of geopolitics on global markets)

“Financial market volatility could rise with capital flow reversals and the widening of risk spreads, set off by falling investor appetite or a sharper-than-expected rise in US long-term rates,” added the IMF.

Risks also include a prolonged period of subpar growth arising from an insufficient demand in advanced economies, or from the effects of adverse financial market conditions on emerging markets. Some economies could also suffer from persistent weaknesses in investment.

The international body says policy support is needed to achieve a more robust recovery with stronger actual and potential growth in many economies.

“For major advanced economies, the IMF suggests that the supportive monetary policy stance should continue, with normalization proceeding gradually—at different speeds in different economies—as economic slack diminishes,” noted the IMF.

“Fiscal adjustment should maintain a balance between supporting short-term and medium-term growth. Financial regulatory reforms should be completed, and macro prudential tools should be developed and used to limit financial instability risks.” 

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