May 19 2017 07:02

Robert Brand, Bloomberg

Cape Town –  The International Monetary Fund raised its forecast for economic growth in South Africa, saying that the end of the worst drought in more than a century will lift agricultural production while rising commodity prices will boost the mining sector.

The Washington-based lender forecast growth of 1% for Africa’s most-industrialised economy in 2017, up from the 0.8% prediction it made in April.

The consumer inflation rate will probably fall below the 6% upper limit of the central bank’s target rate in the second half of this year, it said in a statement after a so-called Article IV visit by officials from May 3 to May 16.

“Following last year’s near-stagnation, there are signs that a modest improvement in the pace of economic growth is underway,” Paolo Mauro, who led the IMF team, said in the statement.

“The pace of recovery this year and the next is unlikely to prevent a further increase in unemployment and a continued decline in per capita incomes.”

South African mining production surged 15.5% year on year in March, beating analysts’ estimates and compared with growth of 4.6% in February. Manufacturing output rebounded in March from a decline the previous month, a separate report showed, as South Africa’s economy recovers from last year’s 0.3% growth, which was the slowest since a 2009 recession.

The government faces a dual challenge of stimulating growth while making the economy more inclusive, the IMF said. That would require reforms of the labour market as well as state-owned companies, it said.

The lender welcomed the government’s affirmation of fiscal goals following the appointment in March of Malusi Gigaba, who replaced Pravin Gordhan as finance minister.

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