South Africa’s economy – Big GDP drop predicted

Growth in emerging economies outside China will stall this year, with recessions taking hold in Latin America, Russia and South Africa, says the Institute of International Finance.

The IIF cut its forecast for global growth for the third time this month, taking it to a minus 1.5%, suggesting the U.S. and the euro zone are already in recession.

While emerging markets as a whole may not shrink because they started the year from a higher base, the growth shock would be the most severe there, economists led by Robin Brooks said in a report Monday.

“EM, excluding China, is flatlining,” the economists wrote. “A deep downturn is the likely result in 2020, given the sharp sudden stop in EM inflows. Underlying all these forecasts is profound uncertainty as to how virulent the Covid-19 pandemic will be in EM.”

Equities in developing nations have erased $5.2 trillion, sovereign-bond risk has risen to an 11-year high and new borrowing has stalled as the coronavirus pandemic shuts down entire nations and brings the world economy to a standstill.

Several countries have announced monetary and fiscal stimulus packages, and the Federal Reserve has let loose unlimited quantitative easing. Yet, markets are in a state of panic as the depth of economic slide is still unclear.

For now, IIF’s projection for 2020 growth in South Africa is -2.5% (Real GDP Growth).

Now read: 402 confirmed cases of coronavirus in South Africa

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South Africa’s economy – Big GDP drop predicted