Moderate economic recovery rests heavily on vaccine
JOHANNESBURG - SOUTH Africa’s economy is expected to bounce back to slight recovery in 2021 due to robust terms of trade and stronger exports.
However, this rebound is heavily reliant on a successful Covid-19 vaccine programme and the relaxation of lockdown restrictions as economic indicators continue pointing to a sharp downturn in 2020.
South Africa will next month begin rolling out the Covid-19 vaccine to 1.5 million mainly healthcare members and other workers in critical government sectors. This is expected to ease the pressure on the public healthcare system, boost confidence and open up more economic sectors as the rise in Covid-19 cases saw alcohol sales being banned.
SA Reserve Bank Governor Lesetja Kganyago this week said that the risks to the domestic growth outlook appeared to be balanced.
Kganyago, however, pointed out that growth in the first quarter of 2021 was expected to remain muted following an expected lower than previously forecast figures for the fourth quarter of 2020.
Kganyago said that getting back to pre-pandemic output levels will take time.
“Global growth, vaccine distribution, a low cost of capital and high commodity prices are supportive of growth.”
“However, new waves of the Covid-19 virus are likely to periodically weigh on economic activity both globally and locally.
“In addition, constraints to the domestic supply of energy, weak investment and uncertainty about vaccine rollout remain serious downside risks to domestic growth.”
The bank forecast that gross domestic product (GDP) will grow by 3.6 percent in 2021 after revising down its 2020 forecast from 8 percent to 7.1 percent as restrictions were eased towards the end of the year. The Bureau for Economic Research (BER) said that the 2020 fourth quarter GDP growth rate would most likely subside after it soared in the third quarter due to the poor performance of hotels, restaurants and business services.
Sectors such as the hospitality and tourism industries were the hardest hit as the curfew and alcohol ban forced restaurants to close early, while closure of beaches restricted tourists destinations.
“Although the lifting of the interprovincial leisure travel ban and the reopening of international travel led to some improvement relative to the third quarter, activity was nevertheless down across the board relative to a year ago,” BER said.
Data from Statistics South Africa on Monday showed that the total income for the tourist accommodation industry fell by 65.5 percent in November 2020 from a year ago.
Investec’s Lara Hodes said the performance was still likely to be notably down as the financial effects of the pandemic on consumers had been unprecedented.
“A second, marked spike in infection rates, necessitating a move back to an adjusted level 3 lockdown and a renewed ban on alcohol sales, will once again likely slow the pace of recovery of the tourism and its allied sectors.”