Concluding Observations *Our estimates suggest that South Africa's potential growth has declined postglobal financial crisis. Potential growth is estimated to have fallen from an average of 3?-4 percent during 2000-08 to 2?-2? percent in 2010-14, implying an output gap between -0.5 to -1.3 percent of GDP in 2014. Structural factors seem to account for the bulk of the decline in actual growth in recent years, with the decline in productivity growth playing an important role in the decline of both the actual and potential growth rates. *Uncertainties associated with estimates of potential growth are large. All estimates, even those with structural underpinnings, involve some filtering and require judgment to interpret the findings. In addition, while some methodologies (e.g., the multivariate filter) generally produce more robust results than others, data revisions or inclusion of new data often leads to revisions (sometimes large) to earlier estimates (see, e.g., Kramer and Farrell, 2014). Our estimation results therefore should be taken with caution. *An improvement in the electricity supply and other structural reforms would raise South Africa's potential growth. Higher electricity availability would help alleviate electricity constraints. This is anticipated to happen slowly over the next few years because although Eskom's two new large power plants are expected to come on line starting from 2015 and other capacity is being added, other parts of the system will have to be taken off for maintenance on the old system and grid upgrades may take time. Higher energy availability would lead to higher overall production capacity of the whole economy and likely an impact on private investment. Reducing days lost to strikes, and advancing structural reforms, especially in product and labor markets and addressing skill mismatches (see the Article IV consultation staff report for more discussions), would also help reduce structural unemployment and raise potential growth.
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|Size: ||3.6 MB|
|Publisher: ||INTERNATIONAL MONETARY FUND|
|Date published: || 2014|
|ISBN: ||9781484387726 (DRM-EPUB)|
|Copying:||of 20 selections every 20 days allowed|
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|Read Aloud: ||not allowed|