IMF lowers SA's economic growth forecasts, urges reforms

Currency dealers say market movements triggered by PM's remarks about approaching IMF for bailout. ─ Reuters  File

"Notwithstanding the present demand momentum, we have downgraded our 2019 United States growth forecast owing to the recently enacted tariffs on a wide range of imports from China and China's retaliation".

The US growth forecast was cut by 0.2 percentage points in 2019 tp 2.5pc.

The IMF said the global economy would grow 3.7 per cent this year, the same as in 2017 but down from the 3.9 per cent it was forecasting for 2018 in July. This growth exceeds that achieved in any of the years between 2012 and 2016, he said.

"There are clouds on the horizon", Obstfeld added. "Growth has proven to be less balanced than hoped".

This comes after the World Bank revised down its growth forecast last week in line with the Reserve Bank. Over the medium term, growth is expected to gradually slow to 5.6 per cent as the economy continues to make the transition to a more sustainable growth path with continued financial de-risking and environmental controls, it noted.

The ministry of finance in an official statement said, "Immediately upon assuming office, the present government had expressed serious concerns over the dire economic situation of the country and had committed to undertake a quick evaluation of all possible options".

He said the aggregate growth rate of Africa is being held down by its three largest economies.

The May federal budget forecast 3 per cent GDP in 2018-19 and the same the following financial year.

Domestic Chinese policies are likely to prevent an even larger growth decline than the one International Monetary Fund projected, but at the cost of prolonging internal financial imbalances, he said.

China's rate of growth could decline by as much as a full percentage point or more by 2019 if a "worst-case" scenario materialises, involving further tariffs, a commensurate Chinese counter-response and a collapse in confidence by businesses and markets. The report said that aggregate growth in the emerging market and developing economy group stabilised in the first half of 2018.

When the USA dollar strengthened earlier this year, investors feared emerging market economies could be in trouble.

The revised estimates includes a worsening outlook for developing economies this year and next compared to the July report, as well as downgrades for the U.S. and China in 2019.

Monday's news was welcomed by brokers as a clear signal that could help steady markets exhausted of almost two months' of uncertainty since Khan's government took office. He urged all countries to prepare their workforces for the ways that new technologies will change the nature of work.

But Obstfeld also told the news conference that Beijing would face a "balancing act" between actions to shore up growth and ensure financial stability. "Unless growth can be made more inclusive than it has been, centrist and multilateral approaches to politics and policy will become increasingly vulnerable - to the detriment of all", Obstfeld said.

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