AfDB cuts South Africa growth outlook by half on trade concerns
South Africa must accelerate structural reforms to offset global challenges that include US President Donald Trump’s trade war, the African Development Bank (AfDB) said as it cut the nation’s economic forecast.
It lowered its forecast for Africa’s most-industrialised economy to a meagre 0.8% this year from a previous estimate of 1.6%, the Abidjan-based lender said in an update to its Country Focus Report for South Africa.
“This is mainly on the fact that we expect trade tensions to pretty much affect net exports negatively,” AfDB country economist Akhona Peter said on Wednesday at an event near Pretoria.
Other risks to the outlook include funding cuts for development assistance and an economic slowdown in China.
South Africa’s Treasury in May trimmed its growth forecast for the year to 1.4% from a prior 1.9%, citing geopolitical tensions including Trump’s trade levies. The US is South Africa’s second largest export destination after China.
The country faces a 31% US import tariff which is expected to be reinstated on July 9 after it was initially postponed. Trump said on Wednesday that he is not considering delaying them again.
“Industries such as agriculture, which rely heavily on US market access, will be particularly vulnerable,” the AfDB said. “In the short-term, this could slow economic activity, decrease firm profitability, and constrain job creation in export-linked industries.”
Domestic risks to the economic outlook include “infrastructure gaps electricity shortages, logistical bottlenecks, and fiscal vulnerabilities arising from the bailout of State-owned enterprises,” the lender said.
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