THE World Bank expects South Africa to grow by 2.1% in 2022, with the benefits of persistently high commodity prices offset by structural problems, including the country’s ongoing electricity shortages.
The 2022 forecast, which is included in the latest ‘Africa’s Pulse’ publication, is in line with the bank’s October estimate, but represents a 2.8% growth deceleration relative to the economy’s performance in 2021.
The report estimates that South Africa grew by 4.9% last year, which represents a 0.3 percentage point upward revision from October and a rebound from the 6.4% economic contraction of 2020.
“The recovery in South Africa, while benefiting from persistently high commodity prices, will continue to be held back by structural problems—including electricity shortages, transport and logistic inefficiencies, as well as labour and product market rigidities.”
The report says that the South Africa economy is projected to return somewhat above its potential growth of 1.1% in 2023 and nudge up to 1.8% in 2024.
“With potential growth closer to 1%, the economy will be unable to achieve significant reductions in structural unemployment, poverty, and inequality,” the bank warns.
It also cautions that the country’s elevated unemployment of about 35.3% will make revenue mobilisation difficult to achieved and could endanger its fiscal consolidation plans.
Elevated oil prices, meanwhile, are likely to translate into more inflation, which will affect the poor disproportionally.
“The Russia-Ukraine war adds uncertainty to the outlook. The country can gain if the terms of trade are favourable, but it will lose if the inflationary effects outweigh the benefit of high commodity prices.”
The report forecasts that growth in sub-Saharan Africa will also decelerate, from 4% in 2021 to 3.6% in 2022.
Excluding Angola, Nigeria and South Africa, regional growth is projected at 4.1% in 2022, and 4.9% in 2023.
“Of the region’s three largest economies, South Africa’s growth is expected to decline by 2.8 percentage points in 2022, dragged by persistent structural constraints, while Angola and Nigeria are projected to continue with the momentum of 2021, up by 2.7 and 0.2 percentage points, respectively, thanks partly to elevated oil prices and good performance of the non-oil sector.”
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