Johannesburg - South Africa's economy should grow by 1.9% next year and by 4.5% in 2014.
The country's unemployment rate could remain at a high of 24.3% in 2010.
According to the Section IV report on South Africa by the International Monetary Fund (IMF), which was announced today, this year's economic growth rate will be minus 2.1%. "In the short term a gradual recovery may be expected in the latter part of this year. The growth rate will still remain below the potential for the economy next year."
On Thursday the Treasury welcomed the IMF's report, although it said that growth prospects for this year were pessimistic.
Treasury also said that it did not agree with the IMF's views on trade, industrial policy and the labour market.
According to the IMF, protectionist trade activity could result in other countries retaliating, pushing up the costs of the international recession for South Africa.
The IMF suggests that South Africa's trade regime could become more transparent and effective through the simplification of the country's tariff structure.
The structural rigidity of South Africa's labour market can increase the cost of employment and restrict job creation, says the IMF.
The organisation considers that South Africa's greatest challenge is to increase spending without again fanning the fires of inflation.
"Increased government expenditure is appropriate, given the recession and a weak economic outlook."
According to the Reserve Bank's Quarterly Bulletin, spending in the second quarter declined by 14.5%.
The IMF also cautions against an excessive salary bill for the public sector and says improvements in service delivery and progress with structural changes are necessary to lighten the pressure on state expenditure.
Several government trade unions have recently succeeded in negotiating double-digit wage increases for their members.
The organisation predicts that this year's budget deficit will be 4.4% of the gross domestic product (GDP).
South Africa's fiscal, monetary and financial policies, including inflation-targeting, are, in the view of the IMF, on the right track.
The organisation says interest rates have possibly bottomed, especially if the Reserve Bank plans to keep inflation within its targeted band of 3% to 6% by the end of 2010.
It also warns against the effect that electricity and other administered prices and nominal wage increases above the inflation rate can have on inflation prospects going forward.
Eskom has already announced that it wants a 40% increase in electricity tariffs next year. This year's increase was 31.1%.
In the IMF's view the strong rand could put downward pressure on inflation, although the organisation considers the currency slightly undervalued.
- Sake24.com
For more business news in Afrikaans, go to Sake24.com.