IMF warns South Africa economy risks stagnation

The near-term growth outlook for Africa's most industrialised economy has deteriorated, an IMF team said after a visit to the country.

Mar 22, 2023 - 22:00
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IMF warns South Africa economy risks stagnation
A general view of the Grootvlei power station, a coal-fired power plant operated by Eskom located in Grootvlei on 18 December 2022. Picture: GUILLEM SARTORIO/AFP

JOHANNESBURG - South Africa's growth is set to decelerate sharply this year due to power cuts and the economy risks stagnation, the International Monetary Fund warned Wednesday.

The near-term growth outlook for Africa's most industrialised economy has deteriorated, an IMF team said after a visit to the country.

"South Africa's economic and social challenges are mounting, risking stagnation amid an unprecedented energy crisis, increasingly binding infrastructure and logistics bottlenecks..." said in a statement.

"Real GDP growth is projected to decelerate sharply to 0.1% in 2023 mainly due to a significant increase in the intensity of power cuts, as well as the weaker commodity prices and external environment," it added.

In January, South Africa's central bank said it expected the economy to grow by 0.3% in 2023, down from 2.0% in 2022.

Gross Domestic Product (GDP) contracted by 1.3% in the last three months of 2022, raising the possibility that the South African economy could enter a technical recession if activity contracts in the first quarter of this year.

South Africa has been battered by record blackouts that have hampered economic activity over the past year, as problems at beleaguered power utility Eskom have mounted.

The outages are costing more that $50-million in lost output each day, according to estimates by the energy minister.

The government said it has taken note of the IMF team's findings.

"National Treasury is aware of most of the risks to economic growth and is working on mitigating measures to address these," the treasury said in a statement.