The recent growth in South Africa’s economy, which defied IMF predictions, can be attributed to global demand for resources linked to infrastructure-led recoveries and pandemic-related decompressions around the world which have led to high commodity prices. This, coupled with a bumper agricultural export performance and the added benefit of Covid-19 relief grants, have helped the economy recover off what was arguably a low base. It is important to understand that this growth is partly the result of pent-up demand which accumulated during 2020.
The big question in the next few months is whether this short-term growth can be translated into long-term sustainable momentum. One of the most significant risks to the country’s economic recovery continues to be the Covid-19 pandemic, including the Delta variant currently driving SA’s third wave of infections which resulted in government moving the country back to lockdown level 4 and stricter restrictions in late June.
Whether the recent economic growth levels can be maintained will largely depend on how quickly and effectively the government can roll out its vaccination programme – which to date has been far too slow – the extent to which commodity prices will hold up, whether inflation will result in the SA Reserve Bank (SARB) and other central banks increasing interest rates, how quickly SA’s infrastructure programme gains traction, the extent to which consumer confidence will be impacted by the end of the Covid-19 relief grants, and how successful National Treasury is in containing the public sector wage bill.
The concerns
This story is from the 23 July 2021 edition of Finweek English.
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This story is from the 23 July 2021 edition of Finweek English.
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