Gordhan slashes growth forecast to 0.9%

Parliament – Finance Minister Pravin Gordhan slashed South Africa’s growth forecast for the year to 0.9 percent of GDP as he tabled an annual budget on which the country has pinned hopes of preventing a credit rating downgrade to junk status.

“The Treasury currently expects growth in the South African economy to be just 0.9 percent this year, after 1.3 percent in 2015,” Gordhan told Parliament on Wednesday.

He said this was the result not only of depressed global economic conditions and the drought ravaging five of South Africa’s provinces, but also Eskom’s woes, labour strife and policy uncertainty for the lack of growth.

“It also reflects policy uncertainty, the effect of protracted labour disputes on business confidence, electricity supply constraints and regulatory barriers to investment.”

Gordhan’s sombre forecast is just 0.1 percent higher than the latest prediction from the World Bank, which also warned this month that internal factors, with policy uncertainty high on the list, were choking the country’s growth rate.

Observers have cautioned in the run-up to the minister’s first budget after he was reinstated in the finance portfolio in December, that should he err on the side of optimism and forecast growth of more than 1 percent, the budget would lack credibility.