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IMF sends growth warning to South Africa

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THE International Monetary Fund (IMF) expects South Africa’s economy to grow by 5% in 2021, reflecting a better-than-expected growth in the year’s first half.

In its latest regional outlook for the Sub-Sahara region published on Thursday, the group warned that this growth could slow significantly in 2022 due to ongoing local issues.

“The outlook has been weighed down by the combined impacts of the third wave of Covid-19 and localized social unrest in July,” the group said.

“With the pace of structural reforms expected to remain limited and the faster-than-expected rebound in 2021, South Africa will be constrained in its ability to sustain the 2021 growth pace, so growth is expected to slow to 2.2% in 2022.”

The IMF has also warned that the entire Sub-Saharan region faces the prospect of repeated Covid-19 waves before vaccines become widely available.

The baseline assumes that localized lockdowns will accompany further outbreaks but that containment measures will generally be less stringent than they were in early 2020, it said.

“Each wave is different, however, with potentially different variants and different containment requirements. By the same token, households and firms have all shifted their behaviour over the past 1 and a half years, adapting as needed.

“Therefore, the impact of future waves on activity remains highly uncertain.”

The IMF said that this uncertainty would persist for as long as the region remains unvaccinated.

While South Africa is better placed than almost all other African countries, authorities and analysts have indicated that the country is unlikely to hit its 70% vaccination target in December.

As new variants emerge, the pressure for booster shots in countries with already high rates of vaccination will likely increase, the IMF said.

“Moreover, the success of the vaccine rollout depends critically on each country’s distribution infrastructure and efforts to quell hesitancy – the latter is likely to be less of an issue once wide availability and accessibility of vaccines are secured.

“Further delays to the rollout would leave sub-Saharan Africa exposed to new, more virulent strains of the virus, raising the prospect that Covid-19 will ultimately become a permanent, endemic problem across the region— inevitably weighing on confidence, growth, and the strength of the recovery.”

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