Johannesburg - The IMF chief on Wednesday praised South Africa's economic policies for shielding the nation from the worst of the global recession but said reforms were still needed to create jobs.

"The South African economy has weathered the immediate effects of the global crisis, mainly due to sound macro-economic policies, its flexible monetary and exchange rate regime and a well-supervised financial system," Dominique Strauss-Kahn told reporters at the end of a two-day visit.

"Economic activity has also rebounded and we expect growth of around 2.5% in 2010," he said, a forecast slightly higher than the government's prediction of 2.3%.

"However, South Africa continues to face challenges in facing high levels of unemployment and income inequality," he said.

"Higher spending and public investment should also boost growth over the medium term but additional reforms are also needed to accelerate growth and job creation and reduce inequality."

Strauss-Kahn also urged South Africa to promote competition in areas like banking and the food industry, where a handful of companies dominate.

"The success of South Africa has important implications for the rest of Africa," he said.

South Africa's economy fell into recession in the last quarter of 2008 but it lasted only nine months and was relatively mild compared to the economic downturn experienced in wealthier countries.

South Africa's economy contracted 1.8% in 2009 but returned to growth in the second half of the year.

The recession was the first in 17 years, ending a period of prolonged growth since the end of apartheid and costing 900 000 jobs in a country where unemployment is already widespread.

- AFP