The International Monetary Fund has warned that South Africa could become politically and socially unstable because of its high unemployment rate.
The International Monetary Fund (IMF) says the stubbornly high jobless rate should be addressed urgently. It has moderated the country's economic growth to 2.6% due to weak external conditions and heightened global uncertainty.
The organisation forecast a 2.7% growth rate in May. Grim reading from the International Monetary Fund, it's slightly revised South Africa's growth prospects downwards.
In its South Africa country report, it now sees GDP coming it at 2.6% for 2012, compared to its previous estimation of 2.7%. It's questioned SA's ability to weather any shocks, like another recession, given the current public debt and fiscal deficit. The National Treasury has welcomed the IMF's analysis of the country, but it's highlighted that the country's
on track to addressing many of the socio-economic challenges.
The IMF sees SA's growth as integrally linked to how the Eurozone economy performs. That's because that region imports around 30% of South African exports. It's pegging GDP at 2.6%, slightly lower than National Treasury's forecast of 2.7%.
Econometrix Chief Economist, Azar Jammine, says it's precisely because the IMF are aware of this problem that the country has had since the formation of the national planning commission and it's formulation of the national development plan to try to address this issue.
The danger is that if South Africa suffers another big recession of the kind we had in 2009, tax revenues would plummet
The IMF is also concerned that our economy can't absorb any further shocks, which would be bad news from a country ratings perspective. Jammine says the reality is that our public debt at present is not anywhere near as high as it is in advanced economies. However, the danger is that if we suffer another big recession of the kind we had in 2009, tax revenues would plummet.
To tackle our dependence on Europe as a major trading partner, National Treasury cited the re-orientation of exports to new markets, as opposed to traditional developed ones. On a positive note, the IMF gave the thumbs up to SA's monetary policy, saying it needs to continue to be accommodative - that's a policy that looks not only at keeping inflation in-check, but looking at economic growth factors as well.