- The International Monetary Fund has upwardly revised South Africa's growth outlook for 2021 from 3.1% to 4%.
- This is off the back of a "positive surprise" in the first quarter's performance.
- The IMF on Tuesday released its latest World Economic Outlook update for July 2021, and it kept the global growth outlook unchanged since the April revision at 6%.
The International Monetary Fund (IMF) has upwardly revised South Africa's growth outlook for 2021 from 3.1% to 4%.
The IMF on Tuesday released its latest World Economic Outlook update for July 2021. The global growth outlook is unchanged since the April revision, at 6%.
The IMF also kept the outlook for sub-Saharan Africa unchanged at 3.4%. However, it upgraded South Africa's growth outlook on the back of the "strong positive surprise" in the first quarter. The economy had expanded 4.6% on a quarter-on-quarter seasonally adjusted basis. This came off the back of a record contraction of 7% in 2020 due to the impact of the lockdown restrictions globally in response to the Covid-19 pandemic. The SA Reserve Bank expects the SA economy to grow 4.2% this year.
The IMF still sees the worsening pandemic developments in sub-Saharan Africa to weigh on the region's recovery.
IMF chief economist Gita Gopinath said that the global growth recovery was continuing - but there was still a divergent gap between advanced and emerging market and developing economies.
In its report, the IMF noted that vaccine access has resulted in two blocs of global recovery. Most advanced economies are set to experience a normalisation of economic activity,, and other countries will face resurgence of Covid-19 infections and death tolls. According to the report, close to 40% of the population in advanced economies has been fully vaccinated. Whereas this is at 11% for emerging economies and a tiny fraction of low-income countries. The IMF said for now the priority must be to deploy vaccines equitably, worldwide.
Another element contributing to the divergence in recoveries is that advanced economies like the US have "sizable fiscal support". Whereas many emerging market and developing economies are trying to rebuild their "fiscal buffers".
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The IMF warned that steady recovery will not be assured especially if segments of the population remain susceptible to the virus and mutations. "Recovery has been set back severely in countries that experienced renewed waves-notably India," the update read.
According to the IMF, a slower-than-anticipated vaccine rollout will allow the virus to mutate further; that, coupled with tightening financial conditions, will negatively impact emerging market and developing economies. This will "severely" set back their recovery and subsequently drag down global growth.
The IMF sees inflation picking up and returning back to pre-pandemic levels in most countries by 2022. "Elevated inflation is also expected in some emerging market and developing economies, related in part to high food prices," the report read. The IMF said that central banks should "look through" the transitory inflationary pressures - and avoid premature tightening.
Recently the SA Reserve Bank kept interest rates on hold.