The World Bank has revised South Africa’s growth forecast for 2021 as gross domestic product (GDP) will be supported by a favourable global environment and base effects.
THE WORLD Bank has revised South Africa’s growth forecast for 2021 as gross domestic product (GDP) would be supported by a favourable global environment and base effects.
In its biannual Africa Pulse report, the World Bank said growth in South Africa was projected to rebound from -6.4 percent in 2020 to 4.6 percent in 2021.
This is a significant GDP outlook from the 4 percent projection the bank forecast in July at the height of civil unrest and riots in South Africa, and more so from its 3 percent April forecast.
The World Bank said the R38.8 billion relief package to support businesses and the R350 monthly payment to households that were affected by the pandemic, as well as by civil unrest, had boosted economic activity.
However, the World Bank warned that South Africa was facing numerous challenges going forward, including a record unemployment rate of 34.4 percent.
“In addition, rising debt levels are weighing on the government’s capacity to address social issues without jeopardising the sustainability of its public finances,” it said.
“Addressing electricity shortfalls, corruption in the ruling party, and pressing needs for reform in the labour and product markets remain priorities to push potential growth.”
The World Bank’s growth forecast is a bit more realistic than the SA Reserve Bank’s optimistic projection of 5.3 percent GDP growth this year, from a previous forecast of 4.2 percent.
Although GDP registered a substantial jump in the second quarter of 2021, high-frequency data suggest that the negative effects of the lockdown measures and unrest will be reflected in the second half of the year.
The World Bank gave a bit of hope for sub-Saharan African economies, saying the region would exit the recession by the end of this year.
The bank said sub-Saharan Africa was set to emerge from the 2020 recession sparked by the Covid-19 pandemic with growth expected to expand by 3.3 percent this year after a contraction of 2 percent in 2020.
This is 1 percent higher than the April 2021 forecast, with the bank saying this rebound was currently fuelled by elevated commodity prices, a relaxation of stringent pandemic measures and recovery in global trade.
However, World Bank chief economist for Africa Albert Zeufack said this remained vulnerable given the low rates of vaccination on the continent, protracted economic damage, and a slow pace of recovery.
Zeufack said fair and broad access to effective and safe Covid vaccines would be key to strengthening Africa’s economic recovery.
“Faster vaccine deployment would accelerate the region’s growth to 5.1 percent in 2022 and 5.4 percent in 2023 – as more containment measures are lifted, boosting consumption and investment,” Zeufack said.
The World Bank said growth for 2022 and 2023 would also remain just below 4 percent, continuing to lag the recovery in advanced economies and emerging markets, and reflecting subdued investment in the region.
– BUSINESS REPORT