World Bank warns SA is facing ‘deepest contraction in a century’
JOHANNESBURG – The World Bank on Tuesday predicted that South Africa’s economic growth would be worse than earlier forecast, warning that it would face the deepest contraction in a century.
The bank said gross domestic product (GDP) would contract 7.1 percent this year, 8 percent weaker than it previously said on coronavirus containment measures.
It said economic activity fell precipitously in the first half of the year.
The bank, however, said that growth was expected to rebound in 2021, helped in part by the R500 billion, or 10 percent-of-GDP, fiscal stimulus package.
It said the recovery could gain further traction if planned structural reforms were implemented, including improved public investment management and greater private-sector participation in infrastructure development.
But the bank said the prospects for faster growth over the medium term were likely to be constrained by fiscal tightening.
It said growth would continue to be dampened by load shedding and the need for extensive maintenance and repair work on the national grid by Eskom.
The bank said growth in sub-Saharan Africa was expected to contract by 2.8 percent this year, the sharpest contraction on record, as a result of these severe economic strains.
It said more than 100 million people in poor countries would be pushed into extreme poverty as the economies of emerging nations contracted 2.5 percent.
The bank said growth could resume to 3.1 percent in 2021, assuming the pandemic fades in the second half of the year, domestic outbreaks of the virus follow a similar path, and growth in major trading partners rebounds.
It said that global growth would shrink by 5.2 percent this year, representing the deepest recession since World War II.
World Bank director Ayhan Kose said the hardest hit would be countries where the pandemic was the most severe and where there was heavy reliance on global trade, tourism, commodity exports and external financing.
“The current episode has already seen by far the fastest and steepest downgrades in global growth forecasts on record,” Kose said.
“If the past is any guide, there may be further growth downgrades in store, implying that policymakers may need to be ready to employ additional measures to support activity.”