JOHANNESBURG - ABSA Bank HAS warned that South African economic growth was likely to remain muted for the rest of the year following a big second quarter collapse in gross domestic product (GDP).
Absa’s senior economist Peter Worthington said yesterday that the unpredictability of the future course of the pandemic had become a source of tremendous uncertainty in the near to medium term.
Worthington said that large parts of the economy could still struggle to restart given a number of ongoing impacts of the Covid-19 pandemic on businesses.
“We believe that even if the country passes peak infections, the virus will continue to vex, requiring inconvenient and economically costly social distancing practices and periodic localised lockdowns or closures of production facilities, as and when outbreaks occur,” he said.
“Unfortunately, we believe the prospects of a relatively robust recovery in the second half of this year have dimmed, given the deteriorating global growth backdrop and the escalation of the Covid-19 pandemic domestically.”
Absa revised its growth forecast slightly for 2020 to a contraction of 8.3percent from 9.7percent previously due to better-than expected foundation in the first-half data.
Worthington said South Africa was unlikely to relax the lockdown further until the pandemic was much more under control, saying this was probably several months away at least.
“The pandemic will leave South Africa poorer, more unequal and more heavily leveraged and this is a poor foundation for economic recovery,” Worthington said.
“The virus itself will continue to depress confidence and shackle economic activity, at least until an effective vaccine is available.”
Worthington also said the current fiscal deficit trajectory showed that the country will not be able to stabilize debt-to-GDP ratio in the medium-term.
He said that the pessimistic forecast, the protracted public sector wage settlement, and the extension of the UIF temporary relief scheme could undo Finance Minister Tito Mboweni’s R230billion target in spending cuts over the next two years.
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