Fri. Jul 3rd, 2020

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Mboweni: Prepare For Deep Recession As Treasury Looks For COVID-19 Funding

Mboweni: Prepare For Deep Recession As Treasury Looks For COVID-19 Funding

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Finance Minister Tito Mboweni on Tuesday said government may have to approach global lenders to help equip the country’s healthcare system to deal with COVID 19.

Mboweni has given a rare media briefing on the effects of the coronavirus on the country’s economy.

He’s warned South Africans to prepare for a deep recession, but said their forecasts were hopeful that growth would rebound slightly in 2021.

The finance minister said the pandemic was not only a health shock, which would stretch the resources of our health care system to the limit.

It is also a domestic economic shock because the decision to lock down the nation will reduce economic activity, both from a demand side and a supply side.

He said as a result of all these pressures, the National Treasury was exploring all funding avenues to finance all COVID-19 related programmes aimed at addressing the pandemic.

But Mboweni has made it clear that the outside funding would go towards fighting the pandemic and not funding any other state programme.

The funding avenues will not be limited locally but will include exploring all global partners and international finance institutions.

These funding transactions will be announced officially once concluded.

THE ECONOMY

  • Things are looking pretty bleak – SARB predicting a GDP contraction of between 2% and 4% this year,
  • The world Bank in Africa is calling the contraction higher – between 2,1% and 5% for Sub-Saharan Africa, with the possibility that the three richest nations – Nigeria, Angola and South Africa – will be hit even harder (some projections putting the GDP contractions as high as 7%, specifically for Angola and Nigeria that make a lot of their money from oil),
  • This will be the region’s first recession in a quarter century,
  • World Bank is also warning of a possible trifecta of damage to Africa – not just to GDP growth, but also as lockdowns lead to a decrease in Agricultural production, prompting a potential food crisis. The third aspect is a likely decrease in the volume of food imports to Africa,
  • President Cyril Ramaphosa, in his capacity as AU head, has assembled a trio of African envoys, including former Finance Minister Trevor Manuel, to make the case for aid and debt relief for the continent,
  • The IMF and World Bank will be going ahead with their scheduled Spring meetings – albeit via teleconference – and Ramaphosa will be there too, making the case in person.

EWN

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