OHANNESBURG/CAPE TOWN – The South African Reserve Bank has slashed its growth forecasts on Monday, predicting the economy could shrink by between 2% and 4% this year due to the coronavirus.
Over the past two weeks, there have been two credit rating downgrades, with the rand plunging to record lows against major currencies.
In its bi-annual monetary policy review, the Reserve Bank said growth was unlikely to exceed 1% next year.
It said there were downside risks to the country’s forecasts should the lockdown be extended or if the global economy weakened more than expected.
The economy was already under pressure before the pandemic hit the country, recording its second recession in two years.
On Friday, ratings agency Fitch cut the country’s credit rating deeper into sub-investment territory, forecasting a 3.8% contraction to the economy this year.
The week before, Moody’s also cut the country’s rating to junk.
Concerns have been raised at the possibility of an extended lockdown period as the coronavirus batters the country’s economy.
The global economy is in freefall and even developed economies are struggling due to the COVID-19 pandemic.
But for emerging economies like South Africa’s, it becomes even more difficult to weather the storm.
Economist Siya Biniza on Monday said the government could not deal with its economic challenges without dealing with the pandemic first.
“We’re definitely in a position where we can’t afford three months, even one week, of the lockdown, but unfortunately, we have to deal with the pandemic. I don’t think we can deal with the economic challenges without having to deal with the pandemic.”
He said the pandemic had had a dire impact on the economy but stressed that the economy would not grow until COVID-19 was dealt with.
For official information about COVID-19 from the Department of Health, please click here.