South Africa

Subdued private investment and exports, and increased uncertainty have depressed growth and worsened social indicators. State-owned enterprises’ (SOEs) risks are materializing, triggering government bailouts of Eskom and administrative intervention in other entities. High fiscal deficits have boosted debt. Nonresident investors are shedding equities and local currency bonds but showing appetite for foreign currency sovereign bonds amid supportive global financing conditions. The external position is moderately weaker than implied by fundamentals and desirable policies. Inflation has slowed to around the mid-point of the target band, aided by one-off factors, but inflation expectations are higher. Banks are sound, albeit with pockets of vulnerabilities.