The International Monetary Fund (IMF) has again lowered its growth outlook for South Africa for 2015, projecting in its October World Economic Outlook (WEO) that the economy would expand by only 1.4% this year and 1.3% in 2016.

The forecasts represent a 0.6 and a 0.8 percentage point downgrade respectively when compared with the 2% and 2.1% projections published for 2015 and 2016 respectively in the July WEO Update.

The latest downward revision came only weeks before Finance Minister Nhlanhla Nene was due to update government’s official growth forecasts as part of the Medium-Term Budget Policy Statement, to be published on October 21.

In February, Nene forecast gross domestic product growth of 2% for 2015, but he had already signalled that the outlook would be downgraded in his October mini-Budget.

Investec economist Annabel Bishop said that, while the 2015 IMF forecast was in line with consensus, the 2016 forecast of 1.3% represented “a bit of a shock”.

The IMF said South Africa needed to focus on removing infrastructure bottlenecks in the power sector, implementing reforms to education, labour and product markets to raise competitiveness and productivity, and improving services delivery.

Meanwhile, it also cut its 2015 growth outlook for the global economy to 3.1% from 3.3% and lowered the 2016 outlook to 3.6%, from 3.8%.

The growth outlook for emerging markets and developing economies was reduced to 4% (4.2%) for 2015 and to 4.5% (4.7%) in 2016.

Economic Counsellor Maurice Obstfeld noted that the 2015 growth projection represented the fifth straight year of declining growth for emerging markets and developing economies.

The weaker performance for developing economies was attributed primarily to the sharp fall in commodity prices, a factor reflected in the WEO’s title, ‘Adjusting to Lower Commodity Prices’.

But Obstfeld also pointed to two other key “currents”, including the “healthy and necessary” rebalancing of the Chinese economy, which was having a direct impact on commodity demand and prices and the equally necessary impending normalisation of US monetary policy.

“South Africa’s growth is projected to be below 1.5% both this year and next, reflecting electricity load-shedding and other supply bottlenecks,” the WEO stated.

Growth in sub-Saharan Africa was expected to slow this year to 3.8% in 2016, from 5% in 2014, a 0.7 percentage point downward revision relative to the April WEO.

“The slowdown in 2015 is primarily driven by the repercussions of declining commodity prices, particularly those for oil, as well as lower demand from China—the largest single trade partner of sub-Saharan Africa—and the tightening of global financial conditions for the region’s frontier market economies.”

The WEO was released in the same week as the World Bank’s Africa's Pulse publication, which forecast that sub-Saharan Africa would grow by 3.7% in 2015, down from the 4.6% recorded in 2014 and well below the average growth rates of better than 5%, which were recorded between 2004 and 2008.

The bank expected the region’s growth to recover to 4.4% in 2016 and 4.8% in 2017. However, author and acting chief economist Punam Chuhan-Pole warned that sub-Saharan Africa would not experience, in the near term, the favourable economic tailwinds that supported Africa’s strong pre-economic-crisis expansion.

The IMF’s Obstfeld indicated that growth in emerging markets and developing economies was projected to rebound in 2016.

“This reflects mostly a less deep recession or a partial normalisation of conditions in countries in economic distress in 2015 (including Brazil, Russia, and some countries in Latin America and in the Middle East), spillovers from the stronger pickup in activity in advanced economies and the easing of sanctions on the Islamic Republic of Iran. China’s growth is projected to slow further, albeit gradually.”