IMF warns that South Africa's economy could stagnate this year due to the energy crisis

FMI alerta que economia da África do Sul pode estagnar este ano devido à crise energética

South Africa may have zero economic growth this year, the International Monetary Fund (IMF) warned yesterday, attributing this stagnation to the electricity crisis that has been causing regular power cuts for months.

In January, South Africa's central bank announced a Gross Domestic Product (GDP) growth forecast of 0.3% for this year, up from 2% in 2022.

The IMF's findings after a mission to the country indicate, however, that the near-term outlook has deteriorated and "real GDP growth is expected to decelerate sharply to 0.1% in 2023, mainly due to a significant increase in the intensity of power cuts."

"South Africa's economic and social challenges are piling up, posing a risk of stagnation amid an unprecedented energy crisis," the IMF warned in a statement, quoted by Lusa.

GDP contracted by 1.3% in the last quarter of 2022 and the country's economy may end this first quarter of 2023 contracting as well.

The electricity crisis has worsened in South Africa since last year, with scheduled load shedding sometimes lasting up to 12 hours a day.

State-owned Eskom is unable to produce enough for South Africa's 60 million people, with aging and poorly maintained power plants.

The cuts cost more than $50 million (€45.98 million) per day in lost production, according to estimates from the Ministry of Energy.

The government is aware of "most of the risks to economic growth and is working on measures to address them," the ministry assured in a statement.

The IMF, which ended its mission to the country on March 17, pointed to, in addition to the electricity crisis, ?increasingly pronounced logistical and infrastructure bottlenecks, a less favorable external environment, and climate shocks?

External risks to economic stagnation include a ?deeper and more prolonged global slowdown, a slowdown in commodity prices, and a shift in global investor sentiment towards emerging markets? write the IMF staff.

Domestically, they point to ?delays in the resolution of the energy crisis" but also to ?slower than expected progress or reversal in reforms and policies, including fiscal consolidation, and increased political uncertainty?

South Africa, which is considered the largest producer of electricity on the continent, producing 80% from coal, also imports 75% of the total output from the Cahora Bassa Hydroelectric Plant (HCB) in Mozambique.

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