Business Day Spotlight
PODCAST | Economic news of the week: SA economy weathers blow after blow
In this edition of Business Day Spotlight, we discuss the economics news of the week as SA begins its phased reopening of the economy.
Our host, Mudiwa Gavaza, is joined by Sanisha Packirisamy, an economist at Momentum Investments, to unpack the issues.
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The conversation begins with Packirisamy explaining the recent S&P Global Ratings decision to downgrade SA further into junk status. S&P cited the effect of the Covid-19 pandemic on the economy and heightened concerns about the long-term sustainability of the country’s debt.
The move is yet another blow for the economy, which lost its last remaining investment grade, from Moody’s Investors Service, in late March.
As grim as the outlook is, Packirisamy says SA is not the only country to have been downgraded. Countries such as Italy, albeit with a higher rating, also had its outlook cut by S&P.
On the reopening of the economy, SA has learnt from the successes and failures of countries in other parts of the world, particularly the US and Europe, says Packirisamy.
She says a phased reopening is probably the best approach to strike a balance between the health and safety of South Africans vs the economy coming to life. Success in flattening the curve and citizens’ adherence to the guidelines given by the government will be key to the success of this plan.
The R500bn stimulus pledged by the government is likely to help the formal sector more than the informal sector, which makes up a growing part of the economy, Packirisamy says. Greater efforts to formalise these businesses, or at least have infrastructure such as water systems and buildings for trading, would go a long way to help the sustainability of this sector, she says.
On the whole, it is a bleak outlook for SA’s economy for the rest of 2020. Recovery will likely take time to kick in and certain types of expenditure are likely to simply fall away for the year.
Packirisamy says they project growth of between 1% and 1.5% in 2021.
The discussion also touches on the challenges and opportunities likely to be faced in reopening the economy; considerations at local, provincial and national level; and if SA is likely to see more stimulus from the government, even as more people go back to work.
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