The International Monetary Fund cut its economic growth forecast for South Africa by almost half to less than 1% as commodity prices slump and global demand remains weak.
Gross domestic product in the country will probably expand 0.7% this year, compared with October’s estimate of 1.3%, the Washington-based lender said in an update to its World Economic Outlook report on Tuesday. The IMF cut its projection for 2017 by 0.3 percentage points to 1.8%.
The economy is struggling to cope with a plunge in metal prices, fueled by a slowdown in its biggest export market, China. Barclays Africa Group Ltd. on Monday cut its 2016 GDP growth forecast to 0.9% from 1.4%, while Bank of America Merrill Lynch slashed its projection by a full percentage point to 0.4% last week.
Finance Minister Pravin Gordhan is set to announce new growth forecasts in his budget speech next month. The government had projected expansion of 1.7% for this year.
The IMF lowered its growth estimate for sub-Saharan Africa for this year by 0.3 percentage points to 4% and reduced next year’s estimate by 0.2 percentage points to 4.7%.
That “mainly reflects the continued adjustment to lower commodity prices and higher borrowing costs, which are weighing heavily on some of the region’s largest economies,” it said.