The World Bank has revised South Africa’s growth projections for 2017 in half on Tuesday after the economy fell into recession earlier this year.
In a report of the global banking group, the country’s growth prospects reduced to 0.6% from an earlier estimate of 1.1%. A 1.1% growth is foreseen for next year and reaching 1.7 % in 2019.
After two consecutive years of negative growth, the efforts of South Africa will not be sufficient to restore positive per capital GDP growth despite recovering from a technical recession in 2017’s second quarter. Poor growth levels are blamed to have resulted from lack of innovation and low levels of productivity performance.
Growth “has been on a downward trend for the last five years — you’ve seen this gradual deceleration of the economy,” says David Faulkner, HSBC’s South Africa economist. Low commodity prices and labor unrest hitting its mining sector made recovery from economic struggle more difficult as the country has also been blighted be weakening consumer and investor confidence.
Investors remain hesitant because of South Africa’s growing political instability, extreme inequality, and policy uncertainty analysts have said. “From last year into this year, you’ve had concerns about politics, political risk and policy uncertainty leading to very low confidence,” Faulkner added
South Africa’s Low Productivity Growth
Consecutive problems have caused recession to South Africa after months of political turmoil and a struggle with their trade and manufacturing industry, causing economic ratings to downgrade in April this year.
According to the World Bank’s report, the country’s productivity growth risks falling further behind other peers as it departs from global growth. Its productivity fell by 6% over the last eight years, partly due to insufficient private sector investment in innovation.
World Bank southern Africa specialist Sebastian Deussus stated in an interview how Africa is not benefiting from the growing global economy and doesn’t see the country’s exports breaking into new markets despite being well-placed in it.
“This slow growth can impact the Fiscus and we have seen tax collection very weak in the recent months, underlying the fact that growth is not taking off and this has consequences on the downgrade on the debt stress and the ability for government to borrow and extend other services,” he says.
A survey projected higher economic pessimism from citizens, showing that few believed the economic position of the country would improve this year as about 80% of its population has experienced poverty in the previous years.
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