While vaccines are a priority the government also needs to implement structural reforms.
While many people favour a W-shaped economic bounce back, Professor Jannie Rossouw of the Wits Business School says recovery does not have to be a W-bounce. “It could be a V-bounce, with some rapid recovery growth in 2021 and thereafter continued slow growth of around 1.5% per annum.”
Hugo Pienaar, chief economist of the Bureau for Economic Research (BER) at the University of Stellenbosch, thinks the first quarter of this year will be a setback to the recovery, because renewed restrictions announced late in December impacted confidence and weighed on spending, especially in January.
“However, based on recent company commentary, the situation seems to have improved from February.”
Investec chief economist Annabel Bishop says the return to pre-pandemic levels of activity is likely to be protracted, with downside risks including a slow vaccination roll out and new variants of the virus. “We anticipate growth of 2.9% year-on-year in 2021, but this is coming off 2020’s low base.”
Back to pre-pandemic levels or higher?
Pienaar explains the time horizon is important here. “This year, 2021 will be a recovery year with real GDP growth likely to surpass the poor pre-Covid rates. Of course this growth comes off last year’s very low base, but we have the ability to surpass the weak pre-Covid growth rates. However, this will require the fast-tracked implementation of structural reforms.”
He warns even though acquiring sufficient vaccines and vaccination of most of the population are and should be the government’s number one priority, we cannot afford to let the ball drop on implementing much-needed structural reforms.
Rossouw expects it will probably take about three years to wipe out the negative economic performance of 2020. “The one problem is the population might continue to grow at 1.5% a year, implying that the decline in per capita GDP might not be recovered until economic growth becomes more than 2% per year on a sustainable basis.”
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