23/01/2018 06:26 SAST | Updated 23/01/2018 06:27 SAST

IMF Cuts SA Growth Forecast

But its likely that the IMF's outlook was compiled before the recent political developments.

Denis Balibouse / Reuters
Christine Lagarde, managing director of the International Monetary Fund (IMF), attends a news conference on the world economic outlook during the World Economic Forum (WEF) annual meeting in Davos, Switzerland, January 22.

The International Monetary Fund (IMF) has slashed South Africa's forecasted growth rate for the next two years to below 1%, Business Day reported. The latest IMF World Economic Outlook report reportedly says political uncertainty is still likely to affect confidence and investment in the future.

Growth for 2018 and 2019 is now expected to remain at 1% and 0.9% -- a drop from the previously expected 1.1% and 1.6%.

Investec chief economist Annabel Bishop told Business Day that the IMF report was probably compiled before the recent political developments -- the election of Cyril Ramaphosa, a favourite of the markets, as ANC president, as well as his recent attempts to bring stability to Eskom.

But in spite of the changes, chief investment strategist at Old Mutual Multi-Managers, Dave Mohr, reportedly warned that there was still political uncertainty.

"There are still two centres of power running the country -- one in the Union Buildings and one at the ANC's headquarters at Luthuli House, limiting the scope for reform," he told Business Day.

According to Fin24, global growth is expected to exceed 2% in 2018 and 2019.

The IMF report states: "This forecast reflects the expectation that favourable global financial conditions and strong sentiment will help maintain the recent acceleration in demand, especially in investment, with a noticeable impact on growth in economies with large exports."

"In addition, the US tax reform and associated fiscal stimulus are expected to temporarily raise US growth, with favourable demand spillovers for US trading partners -- especially Canada and Mexico -- during this period.

"The expected global macroeconomic effects account for around one-half of the cumulative upward revision to the global growth forecast for 2018 and 2019, with a range of uncertainty around this baseline projection."

Sub-Saharan growth is expected to grow by 3.3% in 2018 compared with 2.7% in 2017.

According to BusinessTech, this comes just days after the Reserve Bank revised its growth forecast from 0.7% to 0.9 % for 2017, and 1.4 % and 1.6 % for 2018 and 2019 respectively. This is up from its previous forecast of 1.2 % and 1.5 % for 2018 and 2019.