Higher economic growth and policies to bolster social cohesion must be part of South Africa’s strategy to tackle problems such as poverty and HIV/Aids.
This is according to John Lipsky, first deputy MD of the International Monetary Fund (IMF), who spoke to reporters at Midrand, north of Johannesburg, on Tuesday.
”These efforts could be complemented by revising labour-market regulations and practices that discourage job creation, and by further progress in liberalising and simplifying the trade regime,” he said.
There is every reason to think that South Africa’s potential growth should be stronger than its recent performance. ”There are obvious ways in which the growth potential could be increased.”
Lipsky said the South African Reserve Bank has responded appropriately to signs of inflationary pressures over the past few months, but will need to remain vigilant, ”particularly in view of the uncertainties surrounding the external environment”.
”South Africa’s vulnerability to external shocks has increased as a result of the widening of the current-account deficit.
”However, with strong fundamentals in place, including low external debt, adequate foreign-exchange reserves and strong public finances, the economy is well placed to face these risks.”
Lipsky said South Africa and other emerging economies should take advantage of the relatively good times the world economy is experiencing to improve their structural basis.
”Their growth will then depend less on external factors and more on internal demand.”
He and the IMF Africa department director, Abdoulaye Bio-Tchane, also recommended greater regional integration in the face of globalisation because many African countries are relatively small.
”Intra-regional barriers seem high,” Lipsky said. ”More integration should be beneficial all around.”
The IMF delegation is in South Africa to attend a conference on deepening the financial sector in Africa. — Sapa