Positive growth is expected to return to the local economy, the International Monetary Fund (IMF).
According to IMF, the real GDP contracted in 2019 and is expected to turn positive during 2020 as the impact of last year drought fades and mining production picks up.
“Absent structural reforms, growth would strengthen only gradually over the medium-term,” said Geremia Palomba, IMF official.
The Fund said downside risks to this outlook include a decline in global growth as COVID-19 virus risks materialize, and possible lower-than-expected Southern African customs Union (SACU) revenue and fiscal slippages that would undermine the government’s effort to stabilize public debt dynamics.
“With public debt rising, the authorities need to continue fiscal adjustment policies to stabilize public debt over time and balance the adjustment with broader reforms to support growth.
“In preparation of the FY20/21 budget, the government’s medium-term fiscal adjustment plans and supporting policy measures should be clearly identified.”
Palomba said there is a need to jumpstart structural reforms to reignite growth and boost job creation.
“It is important to improve the efficiency of the economy, including by streamlining business regulations, strengthening market operations of key public enterprises, removing obstacles that contribute to high electricity and transportation costs, and better align wage dynamics in the public sector and in the economy to productivity trends.
“Over time, it is important to remove obstacles to exports and address shortages of skilled workers,” Palomba said.
IMF further indicated that the financial sector remains sound despite weak growth having started to negatively affect banks’ performance.
Palomba indicated that reforms to improve the non-bank regulatory and supervisory framework are advancing, although at a slow pace.