“The worse than expected GDP data for the fourth quarter of 2019 confirms that not only did the South African economy experience a ‘technical recession’ in the second half of 2019, but that growth in 2019 as a whole was also only 0,2%.”

This is according to Prof Raymond Parsons, a well-known economist and academic from the North-West University (NWU) Business School.

“The economic damage done to South Africa’s growth prospects – mainly by Eskom’s dysfunctionality and load shedding – has been stark. This also comes at a time when global headwinds are suggesting that slower world economic growth is now likely, primarily because of the impact of the Coronavirus on international supply chains,” he adds.

Prof Parsons says the latest bad GDP growth news means that the recent budget assumption of 0,9% growth in 2020 now looks too optimistic, and that growth forecasts for 2021 and 2022 will also need to be revised downward.

“Growth in 2020 is now likely to be about 0,6%. The current outlook is now that average growth rates will be less than 1% over the next couple of years. This increases the urgency to rapidly implement pro-growth reforms to get the economy out of its ‘low growth trap’ and facilitate job-rich growth.”

He says downside risks to growth will now challenge some of the basic assumptions upon which the recent budget projections have been based, including the rate at which debt ratios will rise over the next few years.

“Even on the most favourable assumptions the escalating debt trends still present policymakers with difficult choices, but choices that cannot be avoided. These trends will no doubt also be taken into account when Moody’s has to decide later this month whether or not to downgrade South Africa’s investment rating.”