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Johannesburg - Lack of structural reform in South Africa has prompted economists to trim forecasts for growth in the next two years, as low interest rates will not be enough to stimulate consumer demand, a Reuters poll showed on Thursday.
Forecasts for the local economy for 2014 and 2015 were lowered by 0.1 percentage point a piece from last month's median, and are now 2.9% and 3.4% respectively. This year, growth is expected to slow to 2.0%, after a 2.5% expansion in 2012.
Finance Minister Pravin Gordhan on Monday confirmed that economic growth won't reach its 2.7% target this year, but said it will not fall below 2%.
"It is becoming increasingly clear that South Africa will struggle to achieve sufficient growth to make a meaningful dent in high unemployment without structural economic reforms," said Peter Worthington, an economist at Absa Capital, in a note.
The number of unemployed rose to 4.723 million in the second quarter of 2013, around a quarter of the labour force and the highest since the government started the survey in 2008.
The SA Reserve Bank (Sarb) said on Wednesday that the economy needed to grow at 5% to make inroads into joblessness.
The unemployment rate has been stuck around 25% for the past several years and is one of the biggest headaches for President Jacob Zuma's ruling African National Congress ahead of elections next year.
"The need for structural reform has become even more apparent as global conditions are becoming less supportive and demand management policies are currently too stretched to stimulate growth," Worthington said.
Economists polled expected Sarb to keep the repo rate at its four-decade low of 5.0% through next year and then raise it by 100 basis points in total in 2015.
Inflation next year is seen on average at 5.6%, below the central bank's 6% ceiling, and moderating to 5.5% in 2015.
Investors still seem undeterred by the economic woes: the resource-heavy Johannesburg Top 40 index is seen climbing over 3% to new all-time highs before the year ends, as resource stocks and the global economy regain momentum.
Forecasts for the local economy for 2014 and 2015 were lowered by 0.1 percentage point a piece from last month's median, and are now 2.9% and 3.4% respectively. This year, growth is expected to slow to 2.0%, after a 2.5% expansion in 2012.
Finance Minister Pravin Gordhan on Monday confirmed that economic growth won't reach its 2.7% target this year, but said it will not fall below 2%.
"It is becoming increasingly clear that South Africa will struggle to achieve sufficient growth to make a meaningful dent in high unemployment without structural economic reforms," said Peter Worthington, an economist at Absa Capital, in a note.
The number of unemployed rose to 4.723 million in the second quarter of 2013, around a quarter of the labour force and the highest since the government started the survey in 2008.
The SA Reserve Bank (Sarb) said on Wednesday that the economy needed to grow at 5% to make inroads into joblessness.
The unemployment rate has been stuck around 25% for the past several years and is one of the biggest headaches for President Jacob Zuma's ruling African National Congress ahead of elections next year.
"The need for structural reform has become even more apparent as global conditions are becoming less supportive and demand management policies are currently too stretched to stimulate growth," Worthington said.
Economists polled expected Sarb to keep the repo rate at its four-decade low of 5.0% through next year and then raise it by 100 basis points in total in 2015.
Inflation next year is seen on average at 5.6%, below the central bank's 6% ceiling, and moderating to 5.5% in 2015.
Investors still seem undeterred by the economic woes: the resource-heavy Johannesburg Top 40 index is seen climbing over 3% to new all-time highs before the year ends, as resource stocks and the global economy regain momentum.
