CAPE TOWN, June 15 (Xinhua) -- South Africa will not realize the 2017 growth projection of 1.3 percent due to a series of negative developments, Finance Minister Malusi Gigaba said on Thursday.
This continues the trend of low growth over the last several years, undermining the country's progress in significantly reducing inequality, unemployment and poverty, Gigaba said in his latest update on the country's economic situation.
This fundamentally disadvantages a large portion of the population, and is the cause of social instability, he added.
"It therefore requires all social partners to reflect on our progress in bringing about inclusive growth and economic transformation, and to do all that we can and more, from our respective positions," the minister said.
Gigaba cited several factors that hamper the country's growth.
These include the downgrade of the country's credit rating to junk status by Standard & Poor's and Fitch in April and a decision by Moody's in early June to downgrade South Africa's long term foreign and local currency debt ratings at "Baa3 with negative outlook.
All three rating agencies have raised similar concerns over the slow pace of growth-enhancing reforms; growing contingent liabilities amid poor governance at key state-owned enterprises; and political risks, among other issues.
Moreover, South Africa's Gross Domestic Product (GDP) contracted 0.7 percent in the first quarter of 2017, following a contraction of 0.3 percent in the fourth quarter of 2016.
"This trend unfortunately implies that our economy has entered into a recession," Gigaba said.
"Our sovereign credit rating has huge macroeconomic impact, and affects government, business, and ordinary South Africans alike. We are committed to restoring it to a favourable investment grade rating with a positive outlook as quickly as possible," he said.
The government has been deeply engaged with the issue of the recession, analyzing its impact on the growth target, and considering an appropriate response, according to Gigaba.
"We have heard the call from business and investors that providing policy certainty and stabilizing and revitalizing state owned companies are among the most important short term steps we can take to restore confidence," the minister said.
Inclusive growth and economic transformation are the top priorities of the government, and are mutually reinforcing, Gigaba said.
"We need to do the right things for our economy and our society, not just because credit ratings agencies are watching," he said. Enditem
