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South Africa's economy at risk of stagnation, says IMF

South Africa's economy at risk of stagnation, says IMF
South African President Cyril Ramaphosa arrives for his swearing-in ceremony at Loftus...   -  
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Jerome Delay/Copyright 2019 The AP. All rights reserved.

South Africa

South Africa's economy is at risk of stagnating this year as the country's electricity crisis continues to cause regular power cuts, the IMF warned on Wednesday.

In January, the South African central bank announced a GDP growth forecast of 0.3% for the year, against 2% in 2022.

But the short-term outlook in the continent's leading industrial power has worsened, according to the International Monetary Fund (IMF) findings after a mission to the country.

"South Africa's economic and social challenges are mounting, posing a risk of stagnation amid an unprecedented energy crisis," the IMF said.

"Real GDP growth is expected to slow sharply to 0.1% in 2023, mainly due to a significant increase in the intensity of power cuts," the fund said.

GDP contracted by 1.3% in the last quarter of 2022. The country would enter a recession if its economy continued to contract in the first quarter of 2023.

South Africa's electricity crisis has worsened since last year, with scheduled load shedding lasting up to 12 hours daily. State-owned Eskom is unable to generate enough power for South Africa's 60 million people, with ageing and poorly maintained power plants.

The outages cost more than $50 million a day in lost production, according to estimates by the Department of Energy.

"Treasury is aware of most of the risks to economic growth and is working on measures to address them," it said in a statement.

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