The International Monetary Fund (IMF) has raised its growth forecast for South Africa in its latest World Economic Outlook, exceeding an upgraded forecast for emerging and developing economies as a whole, and in contrast to a lowered forecast for advanced economies.
The IMF released an update to its previous (April) World Economic Outlook on Friday.
According to Reports, the IMF raised its April forecast for South Africa’s economic growth from 3.5% to 4% for 2011, and from 3.8% to 4.2% for 2012.
More widely, for sub-Saharan Africa, the IMF forecast that economic activity would continue strengthening, with domestic demand remaining robust, and commodity exporters benefiting from elevated prices.
Alfredo Cuevas, the IMF’s representative in South Africa, said that the upgrade followed a recent visit by an IMF team to the country. He also attributed it to the surprisingly strong showing by the economy in the first quarter of 2011.
Statistics South Africa reported at the end of May that SA’s economy had grown by a higher-than-expected 4.8% in the first quarter of 2011, driven by increased manufacturing activity and despite a contraction in agriculture due to floods in January and February.
The IMF said the global economy, hit by slowdowns in Japan and the United States, was expected to reaccelerate in the second half of the year, but warned that “growth remains unbalanced, and concerted policy action by major economies is needed to avoid lurking dangers”.
Although the IMF kept its overall forecast for global growth broadly unchanged at 4.3 percent for this year, rising to 4.5 percent in 2012, the 187-member institution said the mild slowdown in the second quarter of 2011 was “not reassuring”.
“While growth in most emerging and developing economies continues to be strong, slowdowns caused by the devastating earthquake and tsunami in Japan, weaker than expected activity in the United States, and shocks to oil supply weighed on the global expansion in the second quarter of the year,” the IMF said.
The United States and Japan have been slow to come up with specific plans to bring down their high debt levels, the IMF said, while debt problems in some European countries meant that financial markets were charging high rates to lend them money.
The IMF said that, given recent financial markets’ concerns, policymakers needed “to speed up efforts to tackle the longstanding financial challenges of government risk, banking system vulnerabilities, and the unintended consequences of low interest rates.”
South Africa’s financial position, by contrast, remains relatively sound. Moody’s Investors Service was quoted on Friday saying that South Africa’s A3 government ratings and stable outlook reflected “prudent economic policies that have improved its debt dynamics considerably over the past decade.”
At the same time, Moody’s said South Africa faced “a number of ongoing socio-economic challenges” that were likely to constrain is ratings at their current level “for the foreseeable future”.