While raising its expectations for growth by 0.2 percentage points, the fund also warned that the pace of recovery was unlikely to prevent further increases in unemployment or a continued decline in per capita incomes.
Paolo Mauro, who led the IMF’s team in Pretoria, also highlighted “declining business and consumer confidence”, which had been prompted by recent political turmoil in the country and corruption concerns.
Embattled president Jacob Zuma’s decision to sack finance minister Pravin Gordhan, widely considered a safe pair of hands in a chaotic administration, saw the country lose its investment-grade credit rating earlier this year.
The absence of Gordhan also prompted fears that the country’s fiscal discipline could falter. The fund called for a “mild but steady” reduction in the deficit over the next few years to reduce the likelihood of a sizeable increase in the cost of government borrowing.
“In addition, reforms of public enterprises would reassure investors and the public at large, with associated benefits for public finances and economic efficiency,” Mauro said.
“Such reforms should focus on stronger governance, enhanced transparency and imposition of penalties for failure to adhere to public procurement guidelines, and quantification of public service obligations.”
