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JOHANNESBURG Aug 23 (Reuters) – South Africa’s economic
growth is likely to moderate in 2012 due to weak external
conditions and global uncertainty, the International Monetary
Fund said on Thursday, adding monetary policy should remain
accommodative given limited fiscal space.
The country’s “stubbornly high” unemployment rate could
become politically and socially unsustainable if not addressed,
the fund said in a statement at the conclusion of annual
consultations with the government.
Growth in Africa’s biggest economy will likely reach just
2.6 percent in 2012, the IMF said, cutting its forecasts
slightly from the 2.7 percent seen in May.
Both South Africa’s Reserve Bank and the Treasury see
expansion of 2.7 percent this year, but Finance Minister Pravin
Gordhan has warned he will revise this down in his October
budget review.
The level of government debt, coupled with the budget
deficit, suggested “fiscal space to cope with future shocks has
declined considerably”, the IMF said.
“Monetary policy should remain accommodative, especially
given the limited fiscal space,” it said.
The Reserve Bank cut its main lending rate to 5.0 percent
last month after keeping it on hold for nearly 20 months, citing
a dim growth outlook, while inflation was seen sustainably
within a 3-6 percent target band.
The country’s output gap, the difference between actual and
potential gross domestic product, would likely remain negative
through 2014 and help moderate inflation, allowing the central
bank greater room to respond, the IMF said.
It warned that the country would not be able to reduce
unemployment on a sustained basis without labour market reforms.
The ruling African National Congress has sent to parliament
proposed measures making it more difficult for employers to hire
seasonal labour. Critics say this will be another obstacle to
reducing unemployment of around 25 percent.
(Reporting by Stella Mapenzauswa; Editing by Ed Stoddard)
