South African economy should recover strongly next year, predicts economist

3rd December 2020

By: Rebecca Campbell

Creamer Media Senior Deputy Editor

     

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The South African economy is already on course for a strong recovery and significant growth next year, economic adviser to the Optimum Investment group Dr Roelof Botha told the Commercial Aviation Association of Southern Africa’s virtual 2020 symposium on Thursday. “The V-shaped economic recovery is on track,” he affirmed.

The Covid-19 pandemic had hit the travel and leisure sector very hard, both globally and in South Africa. But the development of Covid-19 vaccines had radically changed the outlook for the sector. He pointed out that, on the world’s major stockmarkets, travel and leisure stocks had surged by 5% to 30% following the announcement of the development of the first vaccine, by Pfizer.

Regarding the South African economy, the value of the country’s sovereign bonds had increased, which was “very very good news”, he highlighted. The rand had strengthened against the dollar, aiding importers, but was still undervalued, so still assisting exporters. 

Under the impact of Covid-19, South Africa’s debt to gross domestic product (GDP) ratio had deteriorated. But this was unexceptional. “Every country in the world has experienced a decline in their debt to GDP ratios.” South Africa’s debt servicing costs were not insurmountable, especially if the economy grew. Economic growth would automatically reduce the debt to GDP ratio.

“The other good news is that the world economy is recovering,” he said. “Next year will be a solid growth year for nearly every country in the world.”

Under the impact of the pandemic, new subsectors in the service industry had emerged. “Covid has thrust the Fourth Industrial Revolution upon us,” he observed. 

The South African economy had been on a growth path before the pandemic had hit. The country could take the knock inflicted by Covid-19, provided the economy starting growing rapidly again. The indications, he assured, were that it would. Indeed, across a wide range of South African economic sectors the indications were for a strong recovery. The South African primary sector had delivered when needed, particularly agriculture.

“We have the lowest interest rates in 50 years – that’s good news,” he stressed. “Will that remain like that? I think so. Inflation is low. … Let’s hope the [South African] Reserve Bank keeps interest rates low for as long as possible.”

Although the first quarter of next year could still be tough, Botha expected the country to experience strong growth next year, perhaps 5.5%. The development of vaccines and their distribution would transform things for the better, especially for the travel and leisure sector. And once things started to return to normal, the travel and leisure sector would experience a “pronounced recovery”.

 

Edited by Creamer Media Reporter

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