The South African economy will over the next three years grow by a moderate 1.6%, the National Treasury projects.
\nThe prediction is contained in the 2022 Medium Term Budget Policy Statement (MTBPS) tabled by Finance Minister Enoch Godongwana before the National Assembly at the Cape Town City Hall on Wednesday.
\nOver the same period, the National Treasury anticipates the country\u2019s economy to shrink over the next three years, saying South Africa\u2019s \u201ceconomic growth levels remain low and insufficient to tackle high poverty and unemployment\u201d.
\nThe department said the country\u2019s broad recovery from the COVID-19-induced crisis of 2020 was supported by higher global commodity prices, which improved export and fiscal revenues.
\nDuring this period, it said, real gross domestic product (GDP) growth recovered to 4.9% in 2021 from a low base following a contraction of 6.3% in 2020. In this regard, Treasury said recovery was hampered by slow implementation of economic reforms and a series of shocks, including the domestic riots and looting in July 2021, historic flooding in April 2022 and escalating power cuts.
\nWhile the 2022 Budget in February projected economic growth of 2.1% this year, the Treasury in the MTBPS revised this down to 1.9%.
\n\u201cGDP growth is expected to average 1.6% over the medium term. The global outlook is also becoming less favourable, with a broad slowdown marked by higher levels of volatility. Global inflation has risen sharply as a result of supply chain shortages exacerbated by the Russia-Ukraine war.
\n\u201cAs central banks take necessary action to combat inflation by raising interest rates, developing countries are experiencing tightening financial conditions, constraining investment and household demand. Slower growth in China is having significant consequences for commodity exporting economies.
\nTo sustain the gains from prudent fiscal policies and improve resilience to shocks, the economy needs rapid, job-creating growth, said the department.
\nOn this front, the document states that government\u2019s growth strategy would in the medium-term focuses on three areas.
\nEnsuring clear and stable macroeconomic policies that emphasise price stability and sustainable public finances would be the first.
\nNext would be to implement growth-enhancing reforms, including addressing the shortage of electricity and dealing with long-running structural constraints in the economy.
\nThirdly, enhancing key enablers for growth and state capability, such as fighting crime and corruption and improving municipal services. The fiscal framework prioritises additional funding for safety and security, and Infrastructure, said the Treasury.
\nInadequate electricity supply, said the department was \u201cthe most urgent problem facing the economy\u201d.
\n\u201cA decade and a half of this binding energy constraint has discouraged investment and weighed on economic growth and job creation. Increasing the supply and reliability of energy is a key part of economic growth reforms, and new measures to achieve this include greater scope for private-sector generation of electricity.
\n\u201cAt the same time, government needs to address infrastructure backlogs, accelerate the reconstruction of damaged structures and installations, fight crime and corruption, and improve the education and health systems,\u201d said the department.<\/p>\n
Source: South African Government News Agency<\/p>\n","protected":false},"excerpt":{"rendered":"