The governor of the South African Reserve Bank (SARB), Lesetja Kganyago, today warned that the South African economy will see the steepest contraction in a century, on the back of the debilitating COVID-19.
“It is now clear that the COVID-19 outbreak will produce the worst economic downturn in a century. We expect that ‘the great lockdown’ will cause output to contract by about 7% this year. The last time a figure of that magnitude appears in our data is 1931, during the Great Depression, when output fell by 6.2%. It had declined by 6.1% in 1930,” cautioned Kganyago.
The Reserve Bank has responded to the outbreak of COVID-19 and its negative impact on economic activity by aggressively cutting interest rates which now stand at a record low. The central bank has also been buying government bonds amongst other interventions.
Kganyago further warned that the country was running out of time to get its house in order.
“Frankly, rather than 1929 repeating itself, I am more worried about a different scenario. As a country, we have got ourselves into a lot of trouble. We are struggling to learn the lessons of these mistakes, and to achieve the consensus to fix them. And we are running out of time. We have just completed our worst growth decade on record – worse than the 1980s or the 1990s. On a per-capita basis, South Africans have been getting poorer since 2013,” said Kganyago
