JOHANNESBURG Feb 10 (Reuters) – South Africa must average economic growth of 7.2 percent to meet its development targets, the World Bank said on Wednesday, and could achieve this by passing laws that encouraged competition and decreased cartel activity.
“This is a very tall order. We need to maintain macro stability, but this not going to be enough. Only fundamental reforms will lift the long term growth rate of the country,” said the World Bank’s lead economist for southern Africa, Catriona Purfield.
The World Bank estimates Africa’s most industrialised economy will grow at only 0.8 percent in 2016, in line with the South African central bank’s most recent forecasts.
The global lending body said South Africa would also struggle to achieve its goal of stabilising its debt-to-GDP ratio due to weak growth and bailouts to state-owned companies running into billions of rands.
At its October budget, treasury said it expected gross debt-to-GDP to reach 49.4 percent in 2018/19.
South African debt is rated one notch above subinvestment grade by Fitch and Standard and Poor’s. A downgrade to junk status would dramatically raise the cost of borrowing.
Markets and rating agencies were closely watching the government’s efforts to maintain its investment grade rating, the bank said in its South Africa economic update report.
The report found that fundamental reform to competition regulations would kick start South Africa’s growth in difficult local and global economic conditions.
“We’re pointing to the potential for competition in markets to spur along growth and accelerate poverty alleviation,” Purfield said.