National Treasury said on Thursday that government was aware of the risks to the South African economy and to economic growth that were highlighted by an International Monetary Fund (IMF) report this week, and agreed that structural reforms were necessary to raise growth and lessen vulnerabilities.

Engineering News Online reported earlier on Thursday that the IMF report warned that the country’s “lackluster” economic outlook carried considerable downside risks, with the country’s high current account deficit “reflecting persistent competitiveness problems, soft terms of trade, supply bottlenecks and subdued external demand”.

The IMF’s Staff Report on the 2014 Article IV Consultation expected the South African economy to grow by only 2.1% in 2015, stating that “binding structural constraints”, such as protracted strikes and electricity shortages, had been increasingly important growth-inhibiting factors.

Treasury noted in a statement responding to the report that many of the risks it identified were already addressed in the National Development Plan (NDP), which outlined measures to be taken to boost growth and ensure that the benefits of that growth were equitably shared among all South Africans.

Further, government’s medium-term strategic framework (MTSF) for 2014 to 2019 provided a roadmap to address these challenges and was the first such five-year policy framework designed in alignment with Vision 2030 of the NDP.

Treasury outlined that the approach to macroeconomic policy outlined in the MTSF and the NDP was aimed at sustaining high levels of public investment and increasing private investment, reducing consumption so that a greater share of investment could be financed from domestic savings, supporting rapid growth in exports and maintaining a competitive real exchange rate to boost economic output and job creation.

“Measures are under way to address the electricity constraints, by investing in critical infrastructure. We are also taking actions to improve labour relations in South Africa through initiatives such as the Labour Relations Indaba, which the
Deputy President hosted on November 4.

“South Africa continues to face challenges to support growth and reduce unemployment; however, we are taking steps to address this challenge, guided by the NDP. Structural reforms are painful in the short run and it will take time to see the impact of the reforms that are currently under way; however, government is committed to the long-term development of our economy,” it stated.