{"id":427696,"date":"2020-08-21T11:05:30","date_gmt":"2020-08-21T09:05:30","guid":{"rendered":"https:\/\/businesstech.co.za\/news\/?p=427696"},"modified":"2020-08-21T11:05:30","modified_gmt":"2020-08-21T09:05:30","slug":"the-single-biggest-risk-to-south-africas-growth-right-now-according-to-economists","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/business\/427696\/the-single-biggest-risk-to-south-africas-growth-right-now-according-to-economists\/","title":{"rendered":"The single biggest risk to South Africa’s growth right now, according to economists"},"content":{"rendered":"

Slow reforms and the return of rolling power cuts in South Africa could threaten the recovery of an economy that probably bottomed in the second quarter.<\/p>\n

Africa\u2019s most-industrialised economy will probably shrink by 8% in 2020, according to the median estimate of 29 economists in a Bloomberg survey that was published on Friday. That\u2019s worse than the 7.5% contraction projected a month ago.<\/p>\n

The government started a phased re-opening of the economy on 1 May and restrictions were eased further to so-called level 2 this week.<\/p>\n

However, business closures and job losses due to the lockdown that shuttered much of the economy, as well as blackouts imposed by state-owned utility Eskom from July, threaten output.<\/p>\n

The state still\u00a0lacks a clear plan\u00a0to revive the economy and reforms such as the sale of spectrum and easing visa regulations have stalled.<\/p>\n

\"\"<\/a><\/p>\n

\u201cThe single biggest risk to growth is slow progress on reforms<\/strong>,\u201d said Mpho Molopyane, an economist at FirstRand Group Ltd.\u2019s Rand Merchant Bank.<\/p>\n

\u201cProtracted periods of load shedding definitely pose risks,\u201d he said, using the local term for power blackouts. The rebound could also be delayed if the global economy takes longer to recover back to pre-Covid levels, he said.<\/p>\n

South Africa\u2019s economy was already in its third quarter of a recession by the time the government imposed a strict lockdown on 27 March.<\/p>\n

That caused manufacturing production, mining output and retail sales to plunge in the three months through June, and the\u00a0recession probably deepened.<\/p>\n

\u201cHigh-frequency data certainly points to the economy bottoming out in April and May, with the second quarter likely to see a record contraction,\u201d said William Attwell, the London-based practice leader for sub-Saharan Africa at DuckerFrontier.<\/p>\n

\"\"<\/a><\/p>\n

Central-bank forecasts show an annualised drop in gross domestic product of 32.6% for the three months through June from the previous quarter.<\/p>\n

The median estimate of 10 economists in a Bloomberg survey is for a contraction of 42.1%. That would be the deepest quarterly decline since at least 1990. The statistics office is scheduled to publish GDP data on 8 September.<\/p>\n

The central bank reduced its key interest rate by 300 basis point this year to prop up the economy, while emphasising that it can\u2019t boost economic growth alone.<\/p>\n

However, on Thursday Governor Lesetja Kganyago said muted inflation gives room to respond to the damage caused by the pandemic if the nature of the shock turns out to be worse than forecast.<\/p>\n

South Africa\u2019s economy remains stuck in the longest downward cycle since World War II, even as activity is expected to rebound off a low base next year. GDP could expand 3% in 2021 and 1.9% in 2022, according to the economists\u2019 estimates.<\/p>\n

Output will probably to improve in three months through September as the global economy gains momentum and business activity picks up as lockdown restrictions are eased, but demand is likely to remain weak throughout the year, Atwell said.<\/p>\n

What Bloomberg\u2019s economist says…<\/strong><\/p>\n

\u201cThe economy has definitely bottomed out from the sharp contraction in activity when it came to a near stand-still in April due to the lockdown.<\/p>\n

Although the recovery is underway, it is significantly weaker than what it could\u2019ve been had government stimulus been deployed sooner and take-up been higher – a lot more jobs and businesses could\u2019ve been saved.<\/p>\n

The resumption of load shedding, the weak demand environment, and the lack of clarity on policy reform doesn\u2019t help.\u201d<\/p>\n

— Boingotlo Gasealahwe, Africa Economist<\/p>\n

\n

Read: Major strike action planned for South Africa \u2013 with protests starting next week<\/a><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"

Slow reforms and the return of rolling power cuts in South Africa could threaten the recovery of an economy that probably bottomed in the second quarter.<\/p>\n","protected":false},"author":59,"featured_media":427502,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[9872],"tags":[26],"class_list":["post-427696","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business","tag-headline"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/427696","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/users\/59"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/comments?post=427696"}],"version-history":[{"count":3,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/427696\/revisions"}],"predecessor-version":[{"id":427728,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/427696\/revisions\/427728"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media\/427502"}],"wp:attachment":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media?parent=427696"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=427696"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=427696"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}