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The South African economy’s ability to recover from its longest downward cycle since 1945 has been affected by new restrictions to curb the rise in coronavirus infections.
The economy entered month 85 of a weakening cycle in December, according to the Reserve Bank’s Quarterly Bulletin published Tuesday.
This is because business and consumer confidence continues to languish at multi-year lows, even after the economy emerged from its longest recession in 28 years in the third quarter, following the gradual easing of a harsh lockdown. Tax since March 27.
Initial virus restrictions that shut down almost all activity except essential services for five weeks forced companies to shut down and wiped out nearly a decade of job earnings, putting the economy on track to contract to the maximum of nearly nine. decades this year.
The latest restrictions announced by President Cyril Ramaphosa on Monday night could slow the recovery.
The type of restrictions announced by the president “could restrict economic activity in specific sectors or industries to varying degrees,” the Reserve Bank said in an email response to questions.
“While this could slow the pace of economic growth and recovery, in some way, it might not have a specific effect on when a lower tipping point in the business cycle.
“This is because the economy has already recovered from such a low base in the second quarter of 2020.”
The last great cycle of economic decline lasted 51 months between 1989 and 1993, when the previous white government renewed the state of emergency and the country prepared for its first democratic elections.
The central bank monitors around 200 indicators that represent economic processes such as production, sales, employment, and prices to determine the direction of the trend.
Here are some of the other key points from the Quarterly Newsletter for the three months through September:
- There were outflows of foreign direct investment of R16.5 billion ($ 1 billion), compared to R17.4 billion of inflows in the previous quarter.
- Portfolio investment outflows of R28.8 billion were recorded, down from an outflow of R54.8 billion in the second quarter.
- Other investment liabilities changed to an inflow of R40.7 billion from a revised outflow of R34.5 billion in the previous quarter, in part due to the receipt of an emergency loan of $ 4.3 billion from the International Monetary Fund and a $ 1 billion credit line from the New Development Bank to combat the effects of the pandemic.
- Household debt as a percentage of disposable income fell to 75.7% from 86.5%.
- Total gross credit debt of the national government increased 20.3% year-on-year to 3.7 trillion rand, or 75.2% of gross domestic product as of September 30. The National Treasury’s medium-term budget policy statement predicted a debt-to-GDP ratio of 81.8% for the fiscal year through March 2021.
- Nominal unit labor cost growth in the formal nonfarm sector accelerated to 10.3% in the second quarter from a revised 4.3% in the three months through March. That’s the highest annual increase since the second quarter of 2010 and occurred even as productivity contracted by 11.8%, the steepest rate yet.
Read: South Africans Investing Abroad Before 2020 Deadline – What You Need to Know
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