SARB warns that the economy may shrink by up to 4% due to coronavirus
South Africa's economy may contract by between 2% and 4% this year as a result of the coronavirus pandemic, the South African Reserve Bank has said.
In its latest Monetary Policy Review, the central bank said there was also limited scope for an economic rebound in 2021, with growth unlikely to exceed 1%.
Speaking on a webcast briefing on Monday afternoon, Reserve Bank Governor Lesetja Kganyago said forecasting had become "nightmarish" given the many moving parts at play.
The Reserve Bank projected that the 21-day shutdown could result in a 2.6% contraction of gross domestic product from the production side of the economy. It also projected about 370,000 job losses and about 1,600 businesses going insolvent.
To unpack what the contraction means for the economy, Bruce Whitfield speaks to ETM Analytics head of research George Glynos.
It is a massive blow to the economy. We need to factor in the fact that this economy is basically brought to a standstill for 21 days because of lockdown. Judging by what we see overseas, those lockdowns are likely to be extended for even longer than the 21 days.George Glynos, Head of research - ETM Analytics
The longer we shut this economy down, the more we damage the ability for the government to generate tax revenues, which are the very foundation of keeping social spending programmes, hospitals'healthcare, education and other social programmes alive in the first place.George Glynos, Head of research - ETM Analytics
The more damage we do to the economy, ramifications for the broader society are in many cases ... perhaps more than the virus might even cause.George Glynos, Head of research - ETM Analytics
Glynos says we will need assistance from the International Monetary Fund, development banks or wherever else we can raise the funds, but we also have to take into consideration the damage we do to the fiscus.
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