Nedbank says that the economy has fared better than expected in the first half of 2021 as low interest rates, less stringent lockdown restrictions, and subdued inflation supported consumer spending.
In a research note this week, the bank said that the continued recovery in global demand and surging commodity prices also underpinned the export earnings.
“Although the economy will remain vulnerable to future Covid surges, recurring lockdowns and subdued confidence in the aftermath of the unrest, it is unlikely to completely derail the recovery as long as calm is restored relatively quickly, and a repeat of the severe economic shutdown of 2020 is avoided.
“Given the better-than-expected growth outcomes of the first half of the year, we have revised our GDP forecast for calendar 2021 up to 4.2% from 3.8%.
“The Reserve Bank’s Monetary Policy Committee will likely raise the policy interest rate marginally in the final quarter of this year as global liquidity and monetary conditions gradually normalise.”
The bank raised concerns around the slow pace of South Africa’s Covid-19 vaccinations, warning that government will probably miss its target to achieve herd immunity by 2022.
The government’s initial plan was to immunise 41 million people by the end of 2021; to date, only around 5.3 million people have been immunised, of which some people would need to take more than one dose to be fully vaccinated.
This slow rollout – combined with the stricter lockdown and the destructive social unrest – is likely to disrupt, but not wholly derail the country’s economic recovery, it said.
“This was the case during the second wave from late December to the end of January. The move to an adjusted level 3 lockdown, which also included a ban on alcohol sales, resulted in weak output and sales outcomes in January, followed by a robust rebound in February and March,” it said.
“As a result, growth continued, with real GDP expanding by a further 4.6% q-o-q (seasonally adjusted and annualised rates) in the first quarter, after recovering at rates of 5.8% and 67.3% in the fourth and third quarters of 2020, respectively.”