The World Bank has said South Africa is “flirting with stagnation if not recession” as it cut the nation’s growth forecast for the year, according to a Bloomberg report.

The international lender warned in a report published on Tuesday that Africa’s second largest economy and the most industrialized, could slide into a recession due to a slowdown in the Chinese economy — the country’s top trade partner –, weaker commodity prices and rising US interest rates.

Apart from these external challenges, South Africa is facing one of the worst droughts in over a century and increased unemployment as mine workers and farm hands get laid off ahead of a municipal election later this year.

Rating agencies Fitch and Standard and Poor’s have place the country’s economy just one place above junk rating and might be forced to lower it in their next review.

“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,” Business Tech quoted Guang Zhe Chen, World Bank country director for South Africa, saying.

“With this study we offer evidence for one such route, competition policy, and hope this will enhance debate and reinforce the case for the bold policy decisions needed to revive the country’s economy for faster growth, more jobs, and poverty eradication.”

The Bretton Wood institution noted that rising public debt and prospective inflationary pressures have placed fiscal and monetary policy on a tightening foot.

It forecast that South Africa’s real gross domestic product (GDP) growth will grow by a paltry 0.8 percent in 2016 — the lowest rate of growth since 2009 — down from 1.3 percent in 2015. The country’s  growth is forecast at 1.1 percent in 2017.

Overall, South Africa is projected to remain largely below the average growth rate of 4.5 percent for Sub-Saharan Africa in 2016–2017, the World Bank said.