The IMF has forecast a drop in South Africa’s growth rate=20 for this year, reports Reg Rumney
International Monetary Fund economists have cut their=20 forecast for South Africa’s growth rate for the 1995=20 calendar year by half a percentage point because of=20 drought. This was revealed at a press seminar held in=20 Windhoek by the IMF, the World Bank and other related=20 multilateral agencies.
Jurgen Reitmaier, IMF chief of South Africa Division I,=20 said the IMF was now working with a projected growth in=20 gross domestic product — the main measure of economic=20 activity — of 2,5 percent to three percent. If the IMF is=20 right, the government’s “conservative” estimate of economic=20 growth for the 1995/96 fiscal year of 2,7 percent begins to=20 look more realistic. And by the same token no unexpected=20 revenue windfalls will come to the government’s aid.
Private sector economists have been looking at three=20 percent to 3,5 percent growth for this calendar year. At=20 the same time, Reitmaier remarked that a growth rate of=20 four percent a year was needed to make any inroads into=20
Reitmaier said the IMF staff had identified three=20 impediments to growth:
* Instability induced by political uncertainty, leading to=20 investors having a wait-and-see attitude.
* Inadequate domestic savings performance, and the need to=20 service foreign debt with low capital inflows.
* High labour costs in the tradeable goods sector.
Reitmaier noted, on the second impediment, that the present=20 economic recovery included a recovery in gross domestic=20 fixed investment.=20
On the third, he said the country needed to moderate unit=20 labour costs and enhance productivity through labour=20 training schemes. He mentioned the National Economic=20 Development and Labour Council’s agenda item of some kind=20 of pact to introduce more flexibility into the labour=20
Reitmaier gave an assessment of South Africa in terms of=20 the usual IMF economic conservatism, stressing the new=20 government’s embracing of an outward-oriented economic=20 policy, and welcoming the removal in the March 15 Budget of=20 Non-Resident’s Tax and import surcharges, as well as cuts=20 in import tariffs.
He also noted these had contributed to the switch from=20 South Africa having sizable surpluses on the current=20 account of the Balance of Payments of around 2,5 percent of=20 GDP up to 1992, to a projected figure of two percent for=20
Also causing the current account gap was the recovery in=20 investment activity as investment goods were brought in.
He praised several other government actions, such as the=20 abolition of the financial rand, the cut in the Budget=20 deficit — the gap between budgeted government revenue and=20 spending — from 6,9 percent in the previous fiscal year to=20 the projected 5,8 percent for the 1995/96 fiscal year, and=20 the reprioritisation of government spending through the=20 Reconstruction and Development Programme.
He expressed the hope that inflation could be kept to=20 single figures though it had risen to double-digits=20 recently, and found favour with the Reserve Bank’s attempts=20 to keep the rise in the money supply moderate.