South Africa’s economy could contract by 3% for each month it spends in lockdown, according to a report by the City Press.
Investec economist Annabel Bishop said that a lockdown of one month could result in a contraction of 3% and, if it lasts for another month, South Africa’s economy could see a 6% contraction.
The World Bank has also warned that South Africa’s GDP could contract by eight percentage points due to the national lockdown and the effect of the coronavirus pandemic.
The South African Reserve Bank (SARB) has also stated that the country’s budget deficit could be more than 10% of its GDP this year.
“This is comparable with historic lows of 11.6% during World War I in 1914 and 10.4% during World War II in 1940,” the City Press stated.
President Cyril Ramaphosa announced on 9 April that South Africa’s national lockdown would be extended by another two weeks until the end of April.
“We are only at the beginning of a monumental struggle,” said Ramaphosa. “If we end the lockdown too soon, we risk a resurgence of the disease.”
He added that risk-adjusted measures will be assessed to ensure certain businesses can return to operation.
The priority for the government is to ensure there is not a massive loss of life, while at the same time not allowing the economy to collapse.
This will see healthcare efforts ramped up, along with financial packages for local businesses.
Massive job losses
Efficient Group economist Dawie Roodt recently told MyBroadband that between 100,000 and 200,000 South African businesses could be shut down permanently due to the impact of the coronavirus and the government’s lockdown.
This would result in massive job losses across the country, with Roodt estimating that 1 million jobs could be lost in South Africa in 2020.
Roodt explained that the South African economy was already in dire straits before the virus came into play.
“The South African economy was in a recession before the virus, so it was contracting in any event,” Roodt said.
“We actually were in crisis and now we have a crisis on top of a crisis, and we were losing jobs in any event.”
“The average South African has been getting poorer every year for the past six years and our unemployment rate just keeps on going up every year,” he said.