SA the only G20 country that will not recover to pre-pandemic levels by 2022 - forecast

Most economists expect growth to be around 4% to 5% this year.
Most economists expect growth to be around 4% to 5% this year.
  • The Economist Intelligence Unit's latest forecasts show that South Africa is the only G20 country which will not recover to pre-Covid-19 levels by 2022.
  • South Africa is among the slower recovering G20 economies lagging behind Argentina, Mexico and Japan.
  • Most economists expect growth to be around 4% to 5% this year.

The South African economy is the only one among the G20 group of countries that will not achieve pre-Covid-19 levels of growth before 2022, according to the Economist Intelligence Unit (EIU).

The EIU is the research and analysis division of The Economist Group. Its latest forecasts indicate that the world economy is expected to grow by 5.4%. It expects the South African economy to grow 4.2%. By comparison, the International Monetary Fund (IMF) expects global growth of 6%, and the South African economy to grow 4%.

This growth is off the back of a global contraction estimated around 3% by the IMF. Following a rebasing and benchmarking exercise by Stats SA last month, the South African economy contracted 6.4% in 2020 and not 7% as reported previously.

In a tweet, global forecasting director at the EIU, Agathe Demarais, highlighted that South Africa is among the slower-recovering G20 states - lagging behind Argentina, Mexico and Japan. The fast-recovering states include China - which is expected to grow 8% this year according to the EIU, the US (with growth of 6%), and BRICS counterparts Russia (with growth of 3.8%) and India (with growth of 8.2%).

During a Wits University lecture earlier this month, SA Reserve Bank Governor Lesetja Kganyago similarly noted that advanced economies such as the US would see their GDP reach pre-Covid-19 levels sooner than emerging and developing economies.

"Slow vaccination rates will continue to weigh on economic recovery in this region (sub-Saharan Africa), even after the lifting of hard lockdowns," Kganyago said. The Reserve Bank expects the economy to grow 4.2% this year.

South Africa's second-quarter GDP figures, however, signalled that the economic recovery has been better than expected. Most economists expect the SA economy to grow by about 4% to 5% this year.

The rebound of growth to 5%, however, rests heavily on whether no new stringent lockdown measures are put in place, as well as no further unrest or other shocks to the economy, Investec chief economist Annabel Bishop said in a separate note on the economy.

Bishop highlighted that the return to pre-pandemic levels has been quicker than likely before Stats SA's rebasing and benchmark exercise. According to Stats SA, the 2020 GDP was 11% bigger than previously estimated.

Economists, however, have indicated that unrest in July is likely to negatively impact third-quarter GDP, Fin24 previously reported.

"The downward growth trend in GDP of the 2010's decade is expected to be reversed in the 2020's decade, as expectations persist for the fruition of the structural reforms government continues to outline, lifting the real economy by 3.0% y/y in 2026,"Bishop said. Investec expects growth close to 2% in 2022.

Johann Els, chief economist of Old Mutual Investment Group, has pencilled in GDP growth of 5.6% this year, followed by growth of 2.3% in 2022.

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