While SA may end up with an official coronavirus rate which is "abnormally" low compared to peer countries, the pandemic may trigger an Eskom "shock" and shrink the economy by 2.4% this year, says Peter Attard Montalto, head of capital markets research at Intellidex.
He expects that the biggest hit will come in the second quarter.
Given the panic buying in recent weeks, the economy should see limited downside in the first three months of the year.
But amid a gloomy global economy, and with no incoming tourism – Montalto expects travel bans will only be lifted in July, while "this is likely far too optimistic" – as well as weak credit growth, with bank clamping down on extension, the full impact will be felt from next month.
The economic impact of the coronavirus will be worse than the fallout from the financial crisis: in 2009, the domestic economy shrank by "only" 1.5%.
Montalto believes the trade, catering and accommodation industry will be worst affected, followed by construction and manufacturing.
Coronavirus infection rate
Montalto expects that South Africa could end up with proportionally less official cases than its other countries due to the hotter local temperatures and early actions like school closures. But this may be offset by worse respiratory health than peer countries. South Africa has one of the highest tuberculosis rates in the world, and it remains a leading cause of death in the country.
"Overall we expect (a) rather slow doubling period to accelerate rapidly once it enters townships but that this may look abnormally low versus peers still."
However, Montalto cautioned that this may be just be the official data - if coronavirus hits townships "in an uncontrolled way", the rate could well be higher in reality, "but data will be patchy".
So far, of the more than 201 000 global cases, South Africa has only 116 confirmed patients.
The impact of the weak economy on government finances will be devastating, though, with Montalto expecting the budget deficit to balloon to 10.8% of GDP in the current fiscal year, from 6.5% last year.
"This represents a R100 billion funding hole in the coming fiscal year. We doubt National Treasury would make intra-year revenue adjustments through tax changes."
Government will be forced to increase its debt issuance – including with new government bonds – by an additional 36%, and may face resistance in the market.
"We must therefore be on the watch-out for market funding and SOE shocks – for instance a sharp drop in Eskom revenue on lower usage."
Montalto warns that there is a risk of liquidity suddenly drying up for state-owned enterprises given the strain on state finances.
Ahead of the monetary policy committee’s decision on interest rates on Thursday, Montalto expects a cut of 50 basis points tomorrow ("with risks of more"). He expects that the repo rate could reach 5.00% by the middle of the year, from 6.25% currently.