The International Monetary Fund on Tuesday lifted South Africa’s economic growth forecast for the next two years citing the election of a new political leadership, but warned growth would underperform if no economic reforms were carried out.
South Africa’s economy has received a shot in the arm with the election of President Cyril Ramaphosa in February replacing scandal-prone Jacob Zuma. Ramaphosa has promised to revive the economy and crack down on government corruption.
The IMF raised its 2018 forecast of gross domestic product to 1.5% for 2018 and 1.7 for 2019, compared to previous forecasts of 0.9% and 1.6% respectively.
South Africa’s economy grew by 1.3% in 2017 compared with a revised 0.6% in 2016.
“Business confidence is likely to gradually firm up with the change in the political leadership, but growth prospects remain weighed down by structural bottlenecks,” the international lender said in its latest World Economic Outlook published in Washington.
“The election of new political leadership reduces some of the policy uncertainty. However, advancement of the outstanding reforms is critical for reinvigorating economic growth and making it more inclusive,” said the IMF.
The IMF said the reforms would improve infrastructure in transport and telecommunication sectors to spur growth.
The lender said South Africa’s economic growth would average 1.8% between 2020 and 2023, well below the country’s target of 5% annual expansion needed to dent soaring levels of poverty and unemployment.
Growth in sub-Saharan Africa is projected to rise to 3.4% in 2018 and 3.7% in 2019, the IMF said.