26 October 2021 – Despite possibly achieving growth of 5% in 2021, revised from 4% previously, South Africa is unlikely to maintain this momentum into 2022 according to the International Monetary Fund (IMF).
The multilateral institution on Thursday released a report on the regional economic outlook for sub-Saharan Africa.
The region is expected to grow by 3.7% in 2021 – this is the slowest recovery in the world, according to Abebe Aemro Selassie, director of the IMF’s African Department. By comparison, advanced markets will grow by more than 5%, and other emerging markets and developing countries are set to grow more than 6%.
“This mismatch reflects sub-Saharan Africa’s slow vaccine rollout and stark differences in policy space,” said Selassie.
The third wave that hit the region has risen to triple or quadruple that recorded in January, according to the IMF. Vaccination efforts in the region are slower than others- largely due to hoarding by advanced economies, export restrictions by major vaccine manufacturing countries and demands for booster shots in advanced economies. Only 3% of the population in sub-Saharan Africa has been vaccinated, compared to advanced and many emerging market countries which have vaccination rates close to 60%, the report read.
Real per-capita income is expected to remain close to 5.5% below pre-crisis trends. By comparison advanced economies are expected to return to their “pre-crisis path” by 2023.
In South Africa, one of the two largest economies in the region, with the other being Nigeria – the civil unrest in July as well as the third wave of Covid-19 weighed on the economic outlook.
“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 report read.
The upward revision to South Africa’s 2021 growth outlook is largely linked to better-than-expected growth during the first half of the year – before the unrest – as well as the impact of its improved national accounts position. The country recorded its largest current account surplus on record- at R343 billion. This has been helped by a stronger trade account, which in turn has been bolstered by the commodities boom.
However, the SA Reserve Bank has warned that the country can’t solely rely on upbeat commodities for the economic recovery, especially as commodity prices are cyclical. There risks being a downturn in commodities. The Reserve Bank has noted that the climb in commodity prices is starting to slow, Fin24 previously reported.
To support sub-Saharan Africa, the IMF’s recent Special Drawing Rights (SDR) allocation helped boost the region’s reserves. Countries received about $23 billion (about R333 billion) out of the $650 billion (about R9.4 trillion) general allocation – which is the largest in the history of the IMF. The allocation is meant to help countries cope with the impact of the Covid-19 crisis. Nigeria and South Africa collectively received one-third of the region’s total SDR allocation.
South Africa received about $4.2 billion or R60 billion. The SA Reserve Bank’s gross reserves in turn increased to a record $58.41 billion (about R848 billion), Fin24 previously reported. The SDRs serve to provide additional liquidity to the sub-Saharan Africa countries which could use it to finance public spending for things like access to Covid-19 vaccines or other health care, according to the IMF. Source (FIN 24)