JOHANNESBURG, Sept.10 (Xinhua) -- South Africa is currently bedeviled by a myriad of local and international pressures which threaten the country's economic growth forecast rate of 1.5 percent this year, said the Finance Minister Nhlanhla Nene on Monday.
Nene said this while speaking at inaugural Thought Leadership Conference hosted by the Government Employees Pension Fund (GEPF) in Johannesburg.
"The outlook for the economy remains fragile. The contraction in gross domestic product growth in the second quarter of 2018 and the downward revision to the first quarter data pose significant downside risks to national treasury's projection of 1.5 percent growth presented in February," said Nene.
He pointed out that South Africa is facing subdued business confidence, weak activity in the supply-side of the economy and various headwinds to household spending.
He stated that the country needs economic growth of over 5 percent to meet the demands of the over 57 million people with an unemployment rate of over 27 percent.
Nene said, "Low growth may threaten the overall long-term potential growth rate of the economy if it translates into the inability of a country to implement critical growth-enhancing interventions such as productive infrastructure investment or improving quality education and skills training."
South African government pays over 17 million people in social grants (old age, children and disability). The low growth rate is making it difficult to meet those obligations and the overall progressivity of tax and fiscal policy, said Nene.
He also observed that the weak growth limits the ability to enact counter-cyclical fiscal and tax policy, which could otherwise be deployed as an additional measure to boost aggregate demand.
"Rising trade tensions and tightening financial conditions have introduced downside risks to the global growth outlook," Nene said. "In addition, a mix of idiosyncratic challenges in several emerging market economies and broader fears of a deteriorating global environment for trade and dollar funding has impacted countries such as South Africa."
He explained that South Africa is still heavily reliant on foreign savings to finance the current account deficit as the domestic funding is not sufficient to meets its demand.
