GDP is projected to grow by 1.7% in 2022, 1.1% in 2023, and 1.6% in 2024. Private consumption and investment will remain the main drivers of growth. Household spending remains supported by social transfers and an improving labour market. Private investment will rise as companies replace an increasingly obsolete capital stock. Inflation is projected to slowly fall in response to tighter monetary policy.
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The COVID‑19 crisis has weakened an already fragile economy. South Africa’s growth underperformed during the past decade: GDP per capita was already lower in 2019 than in 2008. Unemployment remains high, at around 35%, and youth unemployment even exceeds 50%. In the meantime, spending pressures are mounting to close the financing gap in health, infrastructure and higher education. To finance those needs while putting public finances on a more sustainable path, which is key to restore confidence, spending efficiency should improve and be accompanied with increased government tax revenues.
The COVID-19 pandemic has caused millions of workers to lose their jobs, while the number of discouraged workers increased. Investment has been on a downward path already before the crisis, marred by policy uncertainty, and lack of essential infrastructure. Regulatory restrictions in many areas are a threat to the recovery. Stronger growth is needed to place the government debt trajectory on a sustainable path and to finance large unmet needs in education, health and social spending.
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