Economic growth is slowly recovering reflecting stronger world trade and past depreciation of the rand. However, ongoing electricity shortages are slowing the economy. Exports will rely on manufacturing goods, as commodities remain depressed by low international prices. Infrastructure investment will contribute to growth, both by providing demand and by alleviating bottlenecks. As incomes increase and confidence slowly improves, private domestic demand is projected to pick up.
Fiscal policy will remain mildly restrictive, as the government, appropriately, seeks to reduce the deficit and stabilise public debt. The present supportive stance of monetary policy is appropriate, as the economy’s spare capacity should contain inflation pressures. High levels of inactivity and unemployment add to persistently high inequality and require broad-based structural reforms to boost employment creation and make growth more inclusive.
Business investment remains weak, reflecting slow economic growth, low capacity utilisation, regulatory uncertainties, and infrastructure bottlenecks, while residential construction is held back by weak demand and tighter lending conditions. Investment by state-owned enterprises is high, reflecting efforts to alleviate infrastructure bottlenecks.