The International Monetary Fund (IMF) said South Africa faces a prolonged period of weak economic growth marked by rising unemployment, inequality and greater credit-rating risk if the government does not act quickly to implement reforms.
In October, the IMF slashed its 2019 gross domestic production (GDP) forecast for South Africa to 0.5% from 1.2%. On Monday, it said growth would remain subdued in 2020 and beyond if the government pursued its current policies and failed to quickly implement reforms.
“The FY20/21 budget to be presented in February should articulate measures to address fiscal and SOE (state-owned entities) challenges and stabilise government debt,” IMF said in a statement at the conclusion of a two-week, “Article IV” assessment visit to the country.
“Failure to implement the needed adjustment in government and SOE spending and efficiency will worsen debt dynamics, erode financial stability, and further raise the country risk premium.”
President Cyril Ramaphosa since taking over in early 2018, has vowed to stimulate economic growth by winning back foreign investors, reforming SOE's, particularly power utility Eskom which is reliant on government money to stay afloat however, his plan to split Eskom into three entities, seen as a center piece of economic reforms, has struggled to get off the ground.
The IMF visited South Africa from 6 - 21 November to discuss economic and financial developments as part of its bi-annual surveillance function.