South Africa’s Unemployment Rate Unsustainable and GDP to Slow Down

Unemployment

On Thursday the International Monetary Fund (IMF) said that South Africa’s economic growth is likely to slow down in the latter half of 2012 due to global uncertainty and that the country’s monetary policy should remain accommodative.

In May the IMF forecast that South Africa would see a 2.7% economic growth rate, however, they cut this down to 2.6% based on weak external conditions. South Africa’s Reserve Bank and Treasury are still forecasting 2.7%; however, Finance Minister Pravin Gordham has said that this will be revised down in his October budget review. This comes after the Reserve Bank cut its main lending rate to 5% last month after keeping it on hold for nearly 20 months.

The IMF said, “Monetary policy should remain accommodative, especially given the limited fiscal space.”

The IMF also added that the country’s high unemployment rate of approximately 25% could become politically and socially unsustainable, but warned that it could not be reduced without labour market reforms.

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