World Bank drops 2014 growth forecast for

THE World Bank has joined other institutions that are revising downwards their 2014 economic growth forecasts for South Africa as strikes‚ higher interest rates‚ rising inflation and weak demand weigh.

South Africa's economy contracted by 0.6% in the first quarter of this year.

In its latest global economic prospects report‚ the World Bank cut South Africa's economic growth forecast for the year to 2% from an earlier forecast of 2.7%.

It also revised its economic growth forecast for next year downwards to 3% from 3.4% previously‚ and left its outlook for 2016 unchanged at 3.5%.

"Tight monetary policy‚ combined with labour strikes and weak electricity supply‚ will keep growth subdued in South Africa‚" the report said.

Most institutions are downwardly revising their economic growth forecasts for the country as a strike at platinum mines and disruptions to power supply cause lower output by key sectors such as manufacturing. The Reserve Bank cut its economic growth forecast for this year to 2.1% from 2.6% previously.

The World Bank forecast that South Africa's current account deficit – which has often been one of the main reasons behind rand weakness – would improve slightly but remain large. Forecasts are for a deficit of 5.9% this year‚ 4.7% next year and 5% in 2016.

The World Bank said in its report that it expected economic growth in sub-Saharan Africa to remain flat at about 4.7% this year mainly due to economic weakness in South Africa and oil-infrastructure bottlenecks in Angola.

Growth in the rest of the region was expected to remain robust. Economic growth in the region was expected to pick up to about 5.1% in 2015 and 2016.

"Persistent fiscal and current account imbalances require a tightening of monetary and fiscal policy to contain macroeconomic stability risks in several economies‚" the bank said. – BDlive