JOHANNESBURG, (Reuters) – South Africa’s recovery is fragile. Growth will remain below 2% over the medium-term due to policy uncertainty, high debt, and investment constraints, according to the International Monetary Fund, (IMF).

The IMF issued a statement at the conclusion of talks with South Africa stating that the recovery process from the COVID-19 pandemic was faster than anticipated, however, its sustainability remained unknown.

South Africa’s National Treasury replied by saying that it is “a bit more optimistic” about the medium-term outlook than the IMF, and seeing gradual improvement in confidence and investment.

“The National Treasury recognizes that South Africa is in difficult times,” the Treasury said. The Treasury also added it committed to putting public debt on an upward trajectory and decreasing budget deficits.

IMF projects South Africa’s growth to be 1.9% in 2022, after a 4.6% increase in 2021. But it expects that this will slow down to 1.4% by the middle of 2022. In its Friday report, the National Treasury failed to provide any updated growth forecasts.

The economic recovery was considered fragile because it came with worsening unemployment and weak lending by the banks to private sector. Private investment is also low. According to the IMF, despite the rebound in growth, the IMF noted that inequality and poverty have not shown signs of improvement.

Directors of the IMF praised the government’s strong response to the pandemic, but pointed out a number of areas that needed improvement. According to the IMF, Feb. 23’s budget presented an opportunity for concrete actions to limit public sector wages and rationalise state company bailouts, reduce tax expenditure, and improve education subsidy targeting.