(Adds detail, govt response)
JOHANNESBURG, July 30 (Reuters) - The International Monetary Fund on Monday kept South Africa’s economic growth forecast for 2018 unchanged at 1.5 percent but warned that the economy faced several headwinds, mainly the rapid rise in public debt and potential bailouts to state firms.
Cyril Ramaphosa’s election as President in February on a promise to implement reforms and root-out corruption has buoyed investor confidence, although the growth outlook remains much lower than the 5 percent annual growth government is aiming for to make a dent in near-record unemployment.
South Africa’s debt is set to soar to more than 50 percent by 2020 as state firms, including power utility Eskom and South African Airways, burn through government guarantees.
Growth has been stagnant over the past 5 years, pushing the country’s credit rating to the brink of subinvestment.
“The IMF’s concerns on fiscal policy relates to the rapid increase in public debt as a share of GDP, which has doubled over the last decade, depleting fiscal buffers and constraining fiscal policy space,” National Treasury said in a statement quoting the IMF’s article IV statement
“Risks related to potential SOE’s (state-owned enterprises) bailouts will further constrain fiscal policy.”
In response to the IMF’s assessment, the National Treasury said the government was focused on implementing the reforms to sustain investor confidence and attract investment.
“Government continues to prioritise job creation and improving investor confidence through addressing policy uncertainty to attract investment,” Treasury said in a statement.
The Treasury said other measures include Ramaphosa’s drive to attract $100 billion in investment to boost the economy. (Reporting by Mfuneko Toyana Editing by James Macharia)