South Africa’s projections of about 4 percent growth over the next three years are too ambitious in the current global turmoil, and the 7 percent growth it needs to create jobs might not be possible at the moment, said Finance Minister Pravin Gordhan.
Speaking at a business dinner, Gordhan said weakening growth in developed markets and escalating market volatility have cast a shadow over South Africa’s economic outlook, and that the world faced uncertainties for the next three to four years.
The government has said the economy needs to grow by 7 percent a year on a sustained basis to decrease the unemployment rate, which is currently at over 25 percent, Reuters reports.
“At the moment, however, 7 percent might not be possible for South Africa. Our growth projections at the time of the budget and before the current market turmoil were for the economy to grow by about 4 percent per year for the next three years,” Gordhan said.
“Clearly that’s far too ambitious in the current context unless we do something spectacular for ourselves.”
Economic growth in South Africa slowed to 1.3 percent in the second quarter of 2011.
In February, at the time of the budget, the Treasury had forecast growth of 3.4 percent in 2011, 4.1 percent in 2012 and 4.4 percent in 2013.
Current market turmoil, begun by Greece’s debt problems and exacerbated by a U.S. credit downgrade in August, was also likely to affect South Africa’s borrowing in the international market.
“The turmoil may also impact international funding conditions which are important to South Africa given that we intend to borrow almost 450 billion rand to fund our fiscal deficit over the medium term,” Gordhan said.