SA among economies destined to record biggest shortfall in GDP
JOHANNESBURG – NKC Africa Economics has identified South Africa as among emerging economies expected to record the biggest shortfall in gross domestic product (GDP) in 2021.
The research agency said in its global economic outlook yesterday that South Africa and other weak economies would experience a slight delay after imposing some of the strictest lockdown restrictions.
NKC economist Ben May said the economies that were expected to record the biggest GDP shortfall in 2021 relative to 2019 generally suffered from one or more of four broad problems.
May said the economies reliant on hard-hit sectors such as tourism or energy were vulnerable to contraction.
“First, they suffered an especially sharp GDP contraction in the first half of 2020 in part due to long or strict lockdowns. The UK and South Africa are two such examples,” May said.
“Second, they have struggled to contain the virus or persuade the domestic population that the situation is under control, resulting in a slower reversal of lockdown restrictions and greater voluntary social distancing.”
The South African government has moved to finalising its economic recovery plan in the few weeks after the GDP fell by a record annualised 51 percent in the second quarter on Covid-19 impact.
Thus far the country has not experienced a resurgence of the Covid-19 infections and has instead relaxed the restrictions further, allowing for international travel to boost the economy.
The NKC forecast was in line with the Organisation for Economic Co-operation and Development (OECD) which downgraded its outlook for South Africa on Wednesday.
The OECD said South Africa’s GDP will shrink 11.5 percent in 2020, against the government's forecast of a 8.2 percent contraction.
The think-tank said South Africa would suffer more than predicted in June as the economy would struggle to emerge from its deepest slump in 90 years on low demand and power cuts.
NKC revised down its global economic forecast in 2021 to 5.4 percent, from 5.8 percent seen last month, after an expected 4.4 percent drop this year.
May said the revision partly reflected the fact that a Covid-19 vaccine will not be in circulation until the middle of next year, about six months later than previously assumed, resulting in a more prolonged period of social distancing measures.
“Aside from China, we expect few major advanced or emerging market economies to record higher GDP in 2021 than 2019,” May said.
“Those that we think they will are typically fast-growing, or are economies, such as South Korea and Taiwan, that have successfully contained the spread of Covid-19 without needing to resort to a national lockdown.”