BUSINESS NEWS - President Cyril Ramaphosa’s efforts to reform the economy can easily become a case of too little, too late.
Since taking office in February 2018, he has initiated much-needed reform, but the sluggish pace of implementation along with the sad state of the country’s finances leaves SA especially vulnerable should it have to go through an economic shock like the 2008 global financial crisis.
The report did not exactly say that SA needs a bit of luck to avoid an economic catastrophe, but it was certainly implied.
The IMF’s Risk Assessment Matrix rates the likelihood of “rising protectionism and retreat from multilateralism”, “sharp rise in risk premia” and “weaker-than-expected global growth in US, Europe and China” as high in the short to medium term.
Apart from medium level risk of a downturn in the US economy, the IMF’s outlook for global risk is rather negative.
Locally, the fund says there is a medium level of risk that governance setbacks or delays in the implementation of reforms will result in protracted domestic policy uncertainty, and that low growth will lead to a deterioration in banks’ asset quality and liquidity conditions.
It also notes the risk regarding Eskom’s inability to pay its R450 billion debt, and indicates that the threat of government losing the market’s confidence as a result of “excessive budget deficits or other policy missteps” is high.
The IMF defines risk as follows:
- Low – a probability below 10%
- Medium – a probability between 10% and 30%, and
- High – a probability between 30% and 50%.