South Africa’s recent economic growth turnaround is unlikely to last as 2017’s boom fades and the outlook for reform remains murky, the central bank said on Tuesday.
The South African economy expanded by a surprising 1 percent in 2017 as agriculture recovered from a drought the year before, and the Treasury expects growth of 1.5 percent this year.
“The pickup in growth is not especially strong, however, and growth remains below long-term averages,” the Reserve Bank said in its latest Monetary Policy Review document.
“This is mainly because, at this early stage, there is little clarity around the reform agenda, and without specifics it is difficult to quantify growth responses,” the bank said.
The bank said in the absence of “meaningful reforms”, growth was unlikely to exceed 2 percent sustainably.
South Africa is riding a wave of investor optimism since Cyril Ramaphosa replaced Jacob Zuma as leader of the ruling African National Congress party in December and as president in February.
Business confidence hit its highest since late 2015 in January on expectations that Ramaphosa would lead economic reform and fight corruption. It has since diminished slightly as industry leaders waited to see whether Ramaphosa could deliver on promises to revive growth.
Data on Tuesday showed South Africa’s factory output missed estimates in February, following five months of robust growth, pointing to a slow recovery in the economy.