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SA’s economy shrinks 3,2% in first quarter and IMF says ‘SA needs to take robust actions.’

Jun 05, 2019 South Africa, GDP, decline, IMF, robust action

SA’s economy shrinks 3,2% in first quarter and IMF says ‘SA needs to take robust actions.’

First quarter figures for 2019 revealed the largest decline in the past decade, with a 3.2% decline in GDP – almost double the figures expected by economists and market experts. President Ramaphosa has an urgent and demanding task to initiate his economic reform plans and prevent further degradation of both business confidence and Rand value.

The labour intensive mining and manufacturing sectors influenced by Eskom’s continuing failure to provide a reliable power source both recorded negative growth in their contribution to the latest GDP figures.

Taken in conjunction with the following article published in the Daily Maverick, President Ramaphosa needs to act immediately.

South Africa needs to take “robust actions” to reduce its fiscal deficit and reverse the increase in public debt, the International Monetary Fund (IMF)

“The fiscal deficit is set to worsen as weak growth constrains revenue, current expenditure remains rigid, and public enterprises require additional support,” the Washington-based IMF said in an emailed report Monday after staff concluded a visit to the continent’s most-industrialized economy. “As a result, debt pressures are likely to further increase in the near term.”

The National Treasury in February forecast a fiscal gap of 4.5% of gross domestic product for the year starting April 1. If realized, it would be the worst since the 6.3% reported in fiscal 2010.

Weak economic growth and chronically high unemployment mean the state would probably miss its initial revenue-collection targets by more than 42 billion rand ($2.9 billion) in the 2018-19 fiscal year, the Treasury said in February.

Debt-ridden state-owned companies such as power utility Eskom Holdings SOC Ltd. are also placing strain on the country’s balance sheet, the IMF said.

“Action is needed to reduce the fiscal deficit, reverse the ongoing increase in public debt, and restore much-needed fiscal buffers to protect the government’s development objectives and its ability respond to shocks,” the institution said.

South Africa is committed to cutting the fiscal deficit and stabilizing debt, and President Ramaphosa will give more details of the government’s plans to boost growth in his state-of-the-nation speech on June 20, the National Treasury said in an emailed statement.

South Africa, GDP, decline, IMF, robust action

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