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Treasury revises GDP to show 4.8% growth in 2021 - Minister Godongwana

Minister of Finance Enoch Godongwana gives the 2022 Budget Speech to members of the National Assembly virtually at the Goodhope Chamber in Parliament. Image: IOL

Minister of Finance Enoch Godongwana gives the 2022 Budget Speech to members of the National Assembly virtually at the Goodhope Chamber in Parliament. Image: IOL

Published Feb 23, 2022

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The Treasury has revised its forecast of growth in the South African economy in 2021 to 4.8% from 5.1% projected in the November 2021 Medium Term Budget Policy Statement (MTBPS) and the 3.3% forecast in the February 2021 Budget. This was largely due to the unrest in July 2021 in Gauteng and KwaZulu-Natal and the cyber-attack on state logistics firm Transnet.

The official data on GDP from Statistics South Africa will be released on 8 March, which is why it does not make sense to have the Budget in February. The Budget was only moved to February in 1999 as a supposedly once-off event to allow the new Members of Parliament more time to prepare for the June 1999 elections, but bureaucratic inertia has meant that it has been presented in February ever since.

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In addition to its base line projection of growth of 4.8% in 2021, 2.1% in 2022 and 1.6% in 2023, Treasury outlined two additional economic growth scenarios.

In Scenario A it projected stronger growth as rapid increases in electricity supply due to a strong uptake of additional electricity-generating capacity and faster reform implementation boosted performance. The reforms required to achieve this include rapid regulatory adjustments, such as implementing the latest round of renewable energy projects, that would ease the impact of load-shedding on firms and households. In 2021 there was 1 773 Gigawatt-hours of load-shedding.

Scenario B however sees slower growth as it reflects the effects of more waves of Covid-19 infections, assuming the vaccine rollout has a limited effect on stemming the spread of infections. This requires stricter mitigation measures such as an increase in the level of lockdown that depress economic activity. In this scenario, vaccine rollout only gains traction in 2022. Economic recovery is delayed and the momentum from late 2020 is reversed, leading to long-lasting effects and further reducing growth potential. The hospitality and tourism, entertainment, trade, services and transport sectors are particularly negatively affected. The economy grows by only 1.5% in 2022 and economic activity levels remain lower than currently forecast over the long run.

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Enoch Godongwana

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