South Africa

IMF South Africa Staff Report for the 2009 Article IV Consultation

The global financial crisis has sharply altered the outlook for an already slowing economy. Large capital outflows lowered stock prices and depreciated the rand in late 2008. A sharp decline in external demand and a slump in commodity prices have pushed the economy into a recession. Inflows have returned and the rand has appreciated recently, but inflation risks have increased and the current account deficit is projected to widen again. The risks to the outlook are mainly on the downside. The banking system has remained liquid and well-capitalized, but impaired loans are rising as the economy weakens. Policies have been countercyclical, with a large investment-centered fiscal stimulus in FY 2008/9 followed by further easing in FY2009/10, and substantial monetary easing in the first half of 2009. Medium-term budget plans envisage a moderation in spending growth over the medium term.