Focus should be on state spending not downgrades, says World Bank

2017-02-15 15:42

Everybody “hates” the ratings agencies, not only South Africans, the World Bank told Parliament today.

Sébastien Dessus, the World Bank’s programme leader for Africa, pointed this out while presenting an economic update for South Africa to Parliament’s standing committee on appropriations on Wednesday morning.

“A downgrading would be a negative outcome for South Africa. It is not the end of the world, too.”

He said the focus should not be on avoiding a downgrade, but on the quality of state spending and on the management of the economy.

Dessus also said if the ratings agencies downgraded South Africa’s status to junk, 1% would have been shaved off the GDP, dumping 160 000 people in poverty.

The World Bank foresees only a modest and fragile economic recovery in South Africa over the next year unless private investment accelerates.

In order to invigorate South Africa’s economy, he urged South Africa to reorientate its investment tax incentives to include agriculture, manufacturing, construction, and trade. This would encourage investments and job creation.

“There is a lot of potential to attract investors if conditions are better for investors in South Africa,” he said.

Dessus said South Africa’s economic growth wasn’t sufficient enough to lift people out of poverty.

The World Bank has forecast that 2016 will be the third year running that South Africa experiences negative GDP per capita growth. This happens because the population grows faster than the economy.

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