Sunday Tribune

Rising infections undermine recovery

SIPHELELE DLUDLA siphelele.dludla@inl.co.za BUSINESS 24/7 IOL.CO.ZA

SOUTH Africa’s projected growth to near pre-covid-19 levels took a knock as the country revised its lockdown measures down to alert level 3 amid escalating infections.

Last week, economists said the restrictions would stifle recovery in the third quarter, despite optimism that overall growth of 4.2 percent would be achievable if the third wave was contained with no further tighter restrictions.

Investec economist Lara Hodes said the reduced trading times under level 3 lockdown would weigh heavily on certain sectors of the economy, specially the retailers selling alcohol.

“The harsher restrictions, coupled with the added pressure of heightened low shedding and disruptions to the vaccine roll-out could see growth slow somewhat in the third quarter,” Hodes said.

“Depending on how quickly the third wave is contained and in the absence of tighter restrictions, we do, however, still see growth, of around 4 percent, this year.”

There has been a significant increase in the positive rhetoric surrounding economic recovery after the first quarter gross domestic product (GDP) print surprised on the upside, rising 4.6 percent quarter-on-quarter.

This followed what was South Africa’s worst recession in 101 years, with the economy contracting by 7 percent last year.

The recovery has so far largely been driven by favourable terms of trade on the back of the current commodity cycle boom, resulting in a third-consecutive quarter of growth by March.

Business confidence climbed sharply in the second quarter as a rebound in global growth supported domestic exports.

The commencement of the second phase of the vaccine roll-out also boosted sentiment.

Anchor Capital investment analyst Casey Delport said the growth momentum would, however, slow over the remainder of tes year.

Delport cited a combination of electricity load shedding, confidence losses due to rising Covid-19 infections, and a slowdown in consumer spending as downside risk factors.

Delport said that while the probability attached to any longer-term forecasts was low, medium-term real GDP growth of 2 percent-plus was starting to look more feasible.

“While not nearly sufficient to address South Africa’s multiple social ills, this would be a big change from the five years before Covid-19,” Delport said.

“Nonetheless, significant downside risks still remain, which will likely knock the GDP performance for the remainder of 2021.”

South Africa’s vaccine rollout programme remains unstable after 2 million Johnson & Johnson doses were disposed of due to contamination at a manufacturing plant.

Deal Leaders international chief executive Andrew Bahlmann said a drawn-out vaccination procurement and distribution process would probably weigh for some time on economic recovery.

Bahlmann said there could be no sustainable recovery without first stopping the virus.

That would inevitably come at a high economic cost, not least of which would be more business bankruptcies, lost jobs and lower incomes.

“To be realistic, we must assume that vaccinations will only be rolled out in large volume from this moment onward and herd immunity achieved only sometime in 2023,” he said.

“From this point will economic growth cease being constrained by business disruption, cautious consumption and fiscal consolidation.”

BUSINESS

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2021-06-20T07:00:00.0000000Z

2021-06-20T07:00:00.0000000Z

https://sundaytribune.pressreader.com/article/282132114402548

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