Durban - Should South Africans be preparing for an impending catastrophe?
On June 7, the World Bank said global economic growth is predicted to slow down before the end of 2022, and that most nations should start to prepare for a recession.
A recession is when a country faces a back-to-back decline (for two consecutive quarters) in gross domestic product (GDP).
Consequences of a recession include retrenchments resulting in a spike in unemployment, lower wages, increased inequality, and higher government borrowing.
“Following more than two years of the Covid-19 pandemic, spillovers from the Russian Federation’s invasion of Ukraine are set to sharply hasten the deceleration of global economic activity, which is now expected to slow to 2.9 percent in 2022,” the institution said.
World Bank president David Malpass said: “For many countries, a recession will be hard to avoid.”
So, should South Africans take heed and prepare for the worst or is this just speculative? Economist Dawie Roodt said it’s possible that the South African economy could dip into a recession.
According to Roodt, due to the country’s population getting poorer over the years, and an economy that has not been performing well, one could say South Africa has been in a recession for a while.
“There are ways that an economist can tell when a recession will occur, such as when longer-term interest rates are lower than short-term interest rates or if the Reserve Bank is increasing the rates or when people are no longer investing,” said Roodt.
However, no method is 100 percent fool-proof, Roodt warned. “South Africans should be worried… We have been in trouble for a long time.
“We should have begun worrying a long time ago, because we have an incompetent and destructive government that is implementing the wrong kind of economic policies in the country. We should factor in other contributors, but the main reason is the government,” Roodt said.