The North West University (NWU) Business School's Policy Uncertainty Index (PUI) remains in deep negative territory, measuring 56.7 in the fourth quarter of 2020, compared with 58 in the third quarter.

The PUI is published in January, April, July and October each year. An increase beyond 50 reflects heightened policy uncertainty.

NWU Business School Professor Raymond Parsons says that, although global growth is expected to rebound to about 5% this year, after being strongly negative in 2020, several uncertainties remain and depend heavily on how quickly Covid-19 vaccines can be distributed internationally.

On the local front, Parsons notes that the recent return to Level 3 restrictions will have some negative impact on growth; however, it is possible for gross domestic product growth to turn positive this year.

He suggests that recovery needs to be underpinned by economic reform policies that strengthen investor confidence and boost sustained job-rich growth.

For example, the State of the Nation Address (SoNA) and Budget in February must build credibility, while government must continue emphasising an implementation-led economic recovery.

This while the pace of South Africa’s economic revival will largely depend on whether the Level 3 restrictions are extended beyond January 15 or tightened further.

Parsons also recommends that government cut borrowing costs further and expedite South Africa’s access to vaccines.

He mentions that while developing countries normally have about one-third more macroeconomic uncertainty than developed countries, it has changed over recent years with events such as Covid-19, the trade war between the US and China and other geopolitical tensions.

“As the world moves into the second year of the pandemic there remain several unknowns about the future trajectory of the virus. But despite the spike in infections in many parts of the world, how well countries will fare will still be eventually determined by how quickly their economies and societies recover from their respective lockdowns and by the success or otherwise of the policies they have followed so far.”

Parsons adds that in the meantime the Brexit deal between the UK and the European Union (EU) was settled just before the transitional deadline of December 31 and it was overshadowed by a preoccupation with Covid-19. It nonetheless remains a historic moment for future economic and other relations between the UK, EU and third-party countries such as South Africa.

Parsons says South Africa must remain alert to possible unintended trade or supply chain consequences arising from the new complex “Canada-style” UK/EU free trade agreement that is now in effect.