Banking giant FNB said today, it expects household spending to take a R62 billion hit during the 21-day lockdown.
Siphamandla Mkhwanazi, an economist at FNB, said while decisive actions by the government to slow infection rates are welcomed, they unfortunately come at a hefty cost.
“Trade, catering and accommodation will also be heavily hit by the measures implemented by government and general weakness in consumer demand,” said Mkhwanazi.
“To this end, we estimate total household spending in South Africa could take a hit of around R62 billion (in real terms) during the 21-day lockdown. This is equivalent to 1.96% of annual GDP, using 2019 data.”
The grim estimate by the lender is bad news for an economy in desperate need of a surge in consumer spending.
Mkhwanazi also said the bank estimates that South Africa’s economy will contract by 4.5% year-on-year this year – considerably worse than the 1.5% contraction experienced in 2009 at the height of the global financial crisis.
The South African Reserve Bank said yesterday, it expects the economy to shrink by between 2% to 4%.
Mkhwanazi added that the housing market will see less transactions this year as a result of the poor economic outlook.
“For the housing market, we expect a more dramatic impact on transaction volumes, rather than home values. House price growth will likely slow in the low to middle-priced segments, and nominal decline will deepen in the upper end to reflect weakening fundamentals.”
