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Fitch downplays South African Inclusive Growth economic plan    

CAPE TOWN South African (Xinhua) -- The South African government’s newly announced Inclusive Growth Action Plan is unlikely to significantly boost economic growth prospects, international rating agency Fitch said on Wednesday.

Most of the measures have been previously announced, the agency said.

South African Minister of Finance Malusi Gigaba presented the plan on July 13 as a reaction to the recession in the fourth quarter of 2016 and the first quarter of 2017.

Most initiatives focus on governance of state-owned enterprises (SOEs), containing pressure on public finances, and boosting black economic empowerment and addressing inequality.

These measures would only have an indirect impact on growth prospects, Fitch said in a statement.

“Many measures were already announced, for example in the nine-point plan in President (Jacob) Zuma’s February 2015 State of the Nation address, or are part of regular processes, such as the commitment to a sustainable public sector wage deal,” the agency said.

Planned changes to the governance standards for SOEs would be important, but the main obstacle to improving SOE performance remains the implementation of governance standards in day-to-day operations, said Fitch.

Positively, the new package adds firm deadlines for many of the measures, Fitch said.

Some of these deadlines are tight and not all may be met, but they add urgency to policy-making, Fitch added.

Fitch reduced its 2017 real GDP growth forecast for South Africa to 0.6 percent from 1.2 percent in its June Global Economic Outlook.

The agency also lowered its 2018 forecast for the country to 1.6 percent from 2.1 percent.

“The lower forecasts reflect weak first quarter results this year and that political uncertainty will continue to weigh on companies’ willingness to invest,” Fitch said.

Weaker trend GDP growth than ratings peers, partly due to a deteriorating investment climate, is a key weakness for South Africa’s ‘BB+’/Stable sovereign rating, which Fitch affirmed in June, the statement said.



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