Move to Adjusted Level 2 is positive, but economy not yet out of the woods

President Cyril Ramaphosa’s announcement on moving South Africa to Adjusted Level 2 of the lockdown is positive for the economy, whose prospects still need further reinforcement and confidence building.

Prof Raymond Parsons, economist from the Business School of the North-West University (NWU), welcomed the announcement that was made on 12 September of the move to a less restrictive and adjusted Level 2 lockdown.

“Although the recent better-than-expected second quarter gross domestic product (GDP) growth figures are widely expected to put the economy back on track to ‘rebound’ to a 4,5%–5% growth rate this year, the economy is not yet out of the woods.”

He emphasises that, in addition, the third wave of the pandemic is also not over and the importance of the vaccination programme remains.

“This economic caution is necessary because it is widely expected that South Africa’s growth performance in the third quarter remains the hostage of the costs of the civil unrest and violence in July, and recent high-frequency data such as that regarding business confidence and manufacturing production is already strongly negative.”

According to Prof Parsons, economic growth in the third quarter of 2021 will bear the brunt of the July events.

“The more the economy can become ‘lockdown-free’, the more it can help to soften those economic losses.”

He says that by continuing to steadily open up the economy as circumstances permit, especially for the business sectors hardest hit by the lockdowns, the economy’s recuperative powers will be strengthened.

“The highly positive growth expectations for the year as a whole are then more likely to be met. While there are clearly still uncertainties around the future trajectory of the virus, South Africa must now promote short-term economic and business activity as far as possible, as well as urgently tackle the major structural obstacles that still lie in the path of future sustained job-rich growth.”

Submitted on Mon, 09/13/2021 - 10:26