South Africa’s economy is at risk of falling into recession.
This is according to the World Bank which cut the nation’s growth forecast for 2016 to 0.8% .
Economic growth in Africa’s second-largest economy is under pressure following a slump in commodity prices, weakening demand from China and the worst drought in more than a century.
The South African rand has plunged 14 percent against the dollar in the past three months. This year’s growth estimate was cut from 1.4 %, while 2017 projection was lowered to 1.1 % from an earlier 1.6 %.
“ In this prevailing weak economic climate, it is important for South Africa to look to other avenues outside the fiscal space to stimulate faster growth,” said the World Bank country director for South Africa, Guang Zhe Che.
South Africa’s reserve bank raised the bench mark rate by 0.5 % last week to curb rising inflation and the bank expects inflation to reach 7 percent by the end of 2016. Additionally, the bank cut its economic growth forecast to 0.9 percent.
The World Bank’s outlook is in line with that of the International Monetary Fund, which estimates expansion of 0.7 percent in South Africa this year.