South Africa’s economic expansion is expected to slow to 1. 9% in 2022, according to Finance Minister Enoch Godongwana.
This was said by the minister in the National Assembly on Wednesday during the presentation of the Medium-Term Fiscal Policy Statement (MTBPS) 2022 at Cape Town City Hall.
Addressing parliamentarians, Godongwana said this point of expansion is “too low” for the country’s progress goals. “As a result, we want to take steps to put our economy on a path of higher expansion,” he said.
The allocation is a 4. 9% drop in 2021. The forecast, the National Treasury said, is a reaction to global and domestic shocks. Growth is expected to average 1. 6% from 2023 to 2025.
Similarly, the Treasury forecasts headline inflation of 6. 7% for 2022. It forecasts inflation will fall to 5. 1 percent in 2023. Higher domestic food inflation and higher fuel costs have been the main resources of inflationary pressure. This year, food inflation averaged 8. 5%, driven by rising costs for bread, cereals and meat.
The Treasury said that the implementation of structural reforms, specifically in the electricity sector, continues to improve the productive capacity and competitiveness of the economy.
“The recovery in economic activity that began in 2021 has been driven by a strong rebound in global economic activity, higher commodity prices and the relaxation of covid-19 restrictions. The significant effect of the pandemic on employment and investment decisions is more likely to weigh on the medium-term recovery. Investment remains well below pre-pandemic levels,” he said.
In this sense, the country’s economy grew by 1. 4% in the first part of 2022 to the first part of 2021.
“Real gross domestic product (GDP) grew more than expected in the first quarter of 2022, and output returned to pre-pandemic levels. However, the deterioration of the global environment, flooding in KwaZulu-Natal and Eastern Cape, commercial stocks in the force and mining sectors, and prolonged and intense power outages led to a widespread contraction in the peak sectors in the current quarter, reads MTBPS.
“The third quarter was marked by common and prolonged power outages, which severely disrupted economic activity. “
The National Treasury MTBPS said the favorable external environment and commodity value grades that contributed to a faster-than-expected recovery from COVID-19 lows were dissipating.
Risks
In addition, some of the dangers defined in the 2022 Budget have materialized, adding the slowdown in global expansion due to chain disruptions and strict lockdown restrictions in China, skyrocketing inflation, and tighter financial policies.
“South Africa’s structural economic constraints, which add an unreliable electricity supply, high degrees of market concentration, inefficiencies in grid industries and the primary charge of doing business, restrict the rate at which the economy can grow and create jobs. “
The Treasury said those long-standing impediments to expansion have been compounded by recent shocks, which threaten to distance the economy from the goals of the National Development Plan.
“Recent occasions underscore the importance of implementing the economic recovery plan, adding through Operation Vulindlela, to bridge the gap between South Africa’s poor economic functionality and its aspirations,” he said.
A draft review through the National Treasury of the country’s macroeconomic policy since the 2008 global currency crisis highlighted the importance of a transparent and sound macroeconomic framework, the branch said.
These, he said, come with a flexible exchange rate, low and solid inflation and sustainable fiscal policy, as the basis of a developing economy. On that basis, the immediate implementation of economic reforms is mandatory to stimulate economic growth.
Since the 2022 budget review, progress has been made on reforms vital to investment and job creation.
Read: Brief summary of South Africa’s medium-term to 2022
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