SA’s economic growth prospects worsening

Economists expect bigger contraction 

The outlook for the South African economy is deteriorating, with economists expecting a bigger contraction in gross domestic product (GDP) than what the South African Reserve Bank (SARB) has predicted.

This spells bad news for job seekers and the government, which depends on a growing economy to create jobs.

Banking and wealth management group Investec expects the economy to plunge by as much as 10% this year due COVID-19.

Annabel Bishop, the chief economist at Investec, said the economic situation will deteriorate.

“We previously expected economic growth of -4.8% year on year for 2020, but now believe it could come out closer to between -8% year on year to -10% year on year, if not worse,” Bishop said.

The SARB has forecast GDP will plunge by 7% this year, a much steeper decline than the 1.5% contraction recorded in 2009 at the height of the global financial crisis.

The Institute of International Finance this week also downgraded growth prospects and painted a worsening debt outlook.

“We downgrade South Africa’s growth to -8.2% [from -4.7% previously]. Low growth and higher expenditures will lead to a fiscal deficit of 14% of GDP in 2020 and bring the debt-to-GDP ratio to 80% by end-2020,” economists from the institute said.

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