IMF revises SA's growth outlook up to 5%

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The IMF's latest World Economic Outlook highlights the improtance of vaccine access to support global economic recovery.
The IMF's latest World Economic Outlook highlights the improtance of vaccine access to support global economic recovery.
  • The International Monetary Fund has upwardly revised South Africa's growth outlook from 4% to 5%.
  • However the momentum for global growth recovery has weakened, largely due to the pandemic.
  • The IMF has revised the global growth outlook lower to from 6% to 5.9%.

The International Monetary Fund (IMF) has upwardly revised South Africa's growth outlook from 4% to 5%.

The multilateral institution on Tuesday released its World Economic Outlook report for October 2021.

Economic counsellor and director of research at the IMF, Gita Gopinath, noted that global recovery is continuing but its momentum has weakened - largely due to the pandemic and the rise of the Delta variant, which is delaying the return to normalcy.

"Pandemic outbreaks in critical links of global supply chains have resulted in longer-than-expected supply disruptions, further feeding inflation in many countries. Overall, risks to economic prospects have increased, and policy trade-offs have become more complex," Gopinath said.

The outlook for low-income developing countries has also worsened due to the pandemic, and advanced economy groups will also be feeling the impact of supply chain disruptions.

However, the outlook for some commodity producers has been upgraded - mainly due to higher commodity prices.

South Africa's economic recovery particularly has been helped by the commodities boom. The SA Reserve Bank at its September Monetary Policy Committee meeting recently upwardly revised the growth outlook from 4.2% and 5.3%.

But the bank has also warned that South Africa cannot solely rely on the commodities cycle for its recovery - especially if there is a correction in commodity prices. The Reserve Bank in its Monetary Policy Review, released earlier this month, highlighted the importance of South Africa diversifying its sources of recovery. It also noted that the rise in commodity prices is starting to slow.

The IMF has upwardly revised its growth outlook for sub-Saharan Africa from 3.4% to 3.7%.

It noted that global recovery in the labour market still lags that of output recovery. The recovery path for output levels also differs across advanced and emerging market economies. For example, advanced economies can regain their pre-pandemic trend path in 2022, but emerging markets and developing economies - excluding China - will continue to lag into 2024.

The difference in recoveries is also linked to the disparities in vaccine access, and policy support, Gopinath said.

"While almost 60% of the population in advanced economies are fully vaccinated and some are now receiving booster shots, about 96% of the population in low-income countries remain unvaccinated," said Gopinath.

The IMF said it is a priority to have adequate numbers of people vaccinated. This means the Group of Seven and Group of 20 countries must fulfil their dose donation pledges, prioritise deliveries to the COVAX facility - for equitable Covid-19 vaccine access - in the short term and remove trade restrictions on the flow of vaccines and inputs.

Vaccine manufacturers and high-income countries should also support the expansion of regional production for Covid-19 vaccines in developing countries - through financing and technology transfer solutions.

"If Covid-19 were to have a prolonged impact into the medium term, it could reduce global GDP by a cumulative $5.3 trillion over the next five years relative to our current projection," said Gopinath. She stressed that the global community must "step up" efforts for equitable vaccine access for every country.

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