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IMF sees sluggish South African growth in medium term

South Africa’s economic recovery remains fragile and growth is expected to remain below 2% over the medium term due to political uncertainty, high public debt and constraints on investment, the International Monetary Fund (IMF).

In a statement issued after talks with South Africa, the IMF said the country’s recovery from the COVID-19 pandemic had been faster than expected, but its sustainability remains uncertain.

Economic growth is expected to reach 1.9% in 2022 after an estimated rebound of 4.6% in 2021, but it is expected to slow to 1.4% in the medium term, according to the IMF.

“The economic recovery is considered fragile, as it has been accompanied by worsening unemployment, low bank credit to the private sector and anemic private investment. Despite the rebound in growth, poverty and inequality have not shown signs of improving,” he said after a so-called Article IV consultation with South Africa.

IMF directors praised the government for its strong policy response to the pandemic, but highlighted a variety of areas needing improvement.

He said the impending Feb. 23 budget offers an opportunity to take concrete steps to contain public sector wages, streamline bailouts of state-owned enterprises, rationalize tax expenditures and better target education subsidies.