JOHANNESBURG – South Africa's economy has rebounded after COVID, the IMF said on Wednesday while predicting slower growth than the government's forecast with a "lackluster" mid-term outlook.
While the finance ministry predicts the economy will grow by 5.1% this year, the International Monetary Fund said it expects growth to be 4.6%.
"The recovery was also supported by external factors, such as favourable commodity prices and benign financial conditions, which are likely temporary," the IMF said.
South Africa's economy contracted 6.4% last year, when a strict lockdown brought most economic activity to a standstill in the continent's most industrialised country.
Rolling power cuts forced by ageing and poorly designed power plants have added to the economic woes.
Deadly riots in July also spooked investors, as businesses were looted and trashed in Gauteng and KwaZulu-Natal.
"More alarmingly, the rebound has not decreased the unemployment rate amid deteriorating confidence (exacerbated by the July social unrest episode), anaemic private-sector investment, and weak credit extension," the IMF said.
"Staff therefore projects a lackluster medium-term outlook, with growth averaging 1.4% per annum," it added.
The IMF said investors were put off by South Africa's unreliable electricity, telecoms and transportation. It also called for more flexibility in the labour market, improved education, and strengthened anti-corruption efforts.
The Treasury noted the IMF's report, and said its findings largely align with efforts already underway to kick start the economy.
"In general, the IMF's concerns are aligned with government’s response programme to stimulate economic growth," the Treasury said in a statement.