It will take South Africa at least three years to recover from the economic impact of the COVID-19 pandemic and the prolonged lockdown.
This is the view of Nedbank economist Busisiwe Radebe, who was speaking to The Money Show’s Bruce Whitfield about the recent SA Reserve Bank rate cut.
Reserve Bank governor Lesetja Kganyago said on Thursday that they expect the country’s GDP to contract by 7% this year, down from the previous forecast of 6.1%.
Radebe said the Reserve Bank’s adjusted GDP forecast is now in line with Nedbank’s estimate of a 7% contraction.
She said the shrinking economy is a big worry for the country and it will take many years for South Africa to recover.
Nedbank’s economic models around the impact of the COVID-19 pandemic and the lockdown show it will take at least three years to reach pre-crisis peaks.
“When it comes to things like employment, we see that taking even longer to reach the pre-crisis peak,” said Radebe.
“We will still be in this mess trying to undo it three years from now.”
GDP per capita prediction
Economist Mike Schussler’s message regarding the economic impact of the COVID-19 pandemic and the lockdown is even more dire than Radebe’s.
In a recent presentation, Schussler said the SA Reserve Bank and IMF forecasts suggest an 8% decline in GDP per capita this year.
GDP per capita – a measure of a country’s economic output that accounts for its number of people – is a good measure of a country’s standard of living.
South Africa’s GDP per capita peaked in 2014 and showed a steady decline after that since the COVID-19 crisis hit the country.
It will now show a rapid decline and it will take nearly a decade to return to pre-lockdown levels.
South Africa already had 10.4 million unemployed people and many more people will now be without work.
Schussler predicts there could be anywhere between 1.3 million and 2 million jobs lost in South Africa due to the coronavirus crisis.
This will drive the expanded unemployment rate up to 48% from the current 38%. Schussler added that 50% is also a clear possibility.
The hardest-hit will be blue-collar workers like waiters, cashiers, factory employees, contract cleaners, hotel staff, and hairdressers.
Schussler said white-collar workers like civil servants, bankers, lawyers, accountants, and journalists are more protected as they can work digitally.
The chart below shows the impact of the COVID-19 pandemic and the lockdown on South Africa’s GDP per capita.