Strength of SA's economic recovery hinges on vaccine rollout - World Bank

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The World Bank expects the SA economy to recover with growth of 3% in 2021.
The World Bank expects the SA economy to recover with growth of 3% in 2021.
  • Sub-Saharan Africa's economic growth is estimated to have contracted by 2% in 2020, the World Bank says.
  • The Covid-19 pandemic hit South Africa the hardest, and the strength of its recovery depends on the progress of vaccine deployment.
  • Overall growth in the region is forecast to lift between 2.3% and 3.4% in 2021, depending on the policies adopted.

The South African economy's recovery depends strongly on the rollout of Covid-19 vaccines, the World Bank said.

The World Bank on Wednesday released a report on the economic outlook for the Sub-Saharan Africa region.

"Covid-19 has plunged the region into its first recession in over 25 years, with vulnerable groups, such as the poor, informal sector workers, women, and youth, suffering disproportionately from reduced opportunities and unequal access to social safety nets," the report read."

Economic activity in the region is expected to strengthen as actions are deployed to contain new waves of the pandemic and vaccine rollouts gain speed.

"The region is estimated to have contracted by 2% in 2020, with recoveries between 2.3% and 3.4% expected in 2021 - depending on the policies adopted by the countries and the global community. GDP growth for 2022 is estimated at 3.1%. Non-resource intensive economies such as [the Ivory Coast] and Kenya, and mining-dependent economies, such as Botswana and Guinea, will likely see "robust growth" in 2021 on the back of improved private consumption and investment and export increases.

SA hit pretty hard

The Covid-19 pandemic hit South Africa pretty hard, the World Bank noted. South Africa and Angola both drove the 3% contraction in eastern and southern Africa in 2020 - they are the two largest economies in the subregion. "Excluding Angola and South Africa, economic activity in the subregion is projected to expand by 2.6% in 2021, and 4% in 2022," the report read.

The World Bank sees growth in South Africa recovering to 3% in 2021, driven by higher commodity prices.

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The World Bank noted the introduction of alert level 3 restrictions implemented in South Africa in late December until early February to contain the second wave of Covid-19 infections. "In South Africa, the move to lockdown level three implied a shutdown of about 20% of the economy."

Data show a drop in traffic to retail outlets, workplaces, transport use and a slowdown in industrial activity. "Owing to the slow pace of vaccine rollouts, the domestic economic disruption due to Covid-19 restrictions is likely to persist across the region," the report read.

South Africa accounts for the largest number of Covid-19 infections in the region. More than 1.5 million cases of the coronavirus have been recorded and there have been more than 52 000 deaths over the past year. "While the gradual lifting of restrictions is likely to help support economic activity, the strength of the recovery will depend on progress in vaccine deployment," the World Bank said.

Vaccination on track

President Cyril Ramaphosa on Tuesday announced that phase 1 of the vaccination programme - targeted at health workers - is on track to be completed within three months.

Government has secured 11 million doses of the Johnson & Johnson vaccine, and it is finalising an agreement for 20 million more vaccines. Government is also finalising a deal for 20 million doses of the Pfizer vaccine.

"We are also in various stages of negotiations with the manufacturers of other vaccines such as Sinovac, Sinopharm and Sputnik V. Some of these manufacturers in the final stages of the approval process for the use of the vaccines in South Africa," Ramaphosa added. South Africa will also receive vaccine doses from the African Union initiative.

"Although there have been delays in securing vaccine supplies, we are still confident in achieving our vaccination targets," the president said. Phase 2 of the programme is scheduled to start in mid-May.

Reserve Bank Governor Lesetja Kganyago previously said that emerging market economies had been caught in vaccine wars - with some countries hoarding doses, to the detriment of the safety of people of all nations.

Similarly, Ramaphosa echoed sentiments that the race for vaccines has become competitive. He assured that efforts are being made to secure sufficient doses for population immunity to be reached.

The World Bank highlighted that vaccine campaigns and improved pandemic management are helping the global economy recover. However, the vaccine rollout in the Sub-Saharan Africa region has been slow.

"Most countries in the region rely on vaccine deliveries via the COVAX facility, and several countries received COVAX shipments in February-March … As vaccine rollout is slowly beginning in the region, a return to normality in 2021 seems unlikely for most countries."

The World Bank warned that given issues of availability, cost and distribution of vaccines - especially those requiring cold storage - means full national rollouts could take several years. This could delay the lifting of Covid-19 restrictions and negatively impact economies in the region.

The World Bank estimates that most people in the region won't be inoculated before 2022. Some countries will be more successful than others in accessing vaccines and distributing these to their citizens. Still, most people in the region are unlikely to be inoculated before 2022, which will delay the removal of Covid-19 restrictions.

Growth is expected to rise to 3.1% in 2022, broadly unchanged from the October 2020 forecast, as the pace of vaccine deployment accelerates across the region, providing a stronger boost to consumer and business confidence.

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