JOHANNESBURG – The World Bank has warned that the country’s economy is at risk of falling into a recession.

The bank has released a report revising the growth forecast to just 0.8 percent for this year.

The World Bank says the country is flirting with stagnation, if not recession, with this year’s growth cut from an initial figure of 1.4 percent.

It says 2017’s projection has been lowered to 1.1 percent from 1.6 percent.

This is well below the average growth rate for sub-Saharan Africa of 4.5 percent for the next two years.

The bank says the country is battling with a slump in commodity prices, weakening demand from China and a severe drought.

The forecast brought the bank in line with the International Monetary Fund, which in December halved its 2016 growth forecast for South Africa to 0.7 percent. The bank sees growth at 1.1 percent in 2017.

“In this prevailing weak economic climate, it is important for South Africa to look to other avenues outside the fiscal space to stimulate faster growth,” said the World Bank country director for South Africa, Guang Zhe Chen.

However, it says promoting domestic competition between firms can help spur faster growth and poverty alleviation.

This could then lead to job creation and stronger economic confidence.

By the expanded definition of unemployment, which includes people who have stopped looking for work, 34.4 percent of South Africans are out of work.

But the bank says bold policy decisions are needed to revive the country’s economy.

Rising public debt and inflationary pressures had put forced South Africa’s fiscal and monetary policy towards tightening foot, the body said in the report.

South Africa’s central bank expects inflation to reach seven percent by the end of 2016, outside an upper limit of six percent that it targets.

Additional reporting by Reuters.

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