Reserve Bank forsees possible 2% shrink in the economy due to coronavirus

The South African Reserve Bank has predicted a possible 2% contraction in the country’s economy this year a result of the coronavirus pandemic.

This is according to their latest Monetary Policy Review which has labelled the pandemic the “biggest shock to the global economy since Lehman Brothers’ bankruptcy”.

The SARB did, however, add that monetary policy has space to respond given lower inflation and advised that stronger recovery needs “bridging” and longer-run fixes.

Fin24 reports that Reserve Bank Governor Lesetja Kganyago said forecasting had become “nightmarish” given the many moving parts at play.

Speaking during an online briefing on Monday, he added that “South Africa was already in recession prior to the Covid-19 shock, and the situation has become more challenging since”.

The Reserve Bank projected that the lockdown period could result in a 2.6% contraction of GDP from the production side of the economy.

The 21-day shutdown is likely to reduce 2020 GDP by 2.6 percentage points, immediately, not counting indirect effects. #AprilMPR #SARBMonetaryPolicyForum #TalkToTheSARB pic.twitter.com/uTtePEZ3fF

— SA Reserve Bank (@SAReserveBank) April 6, 2020

Additionally, the report estimated that the country would see about 370,000 job losses and about 1,600 businesses going insolvent.

Significant job losses and business failures are expected, with a partial rebound following the shutdown. #AprilMPR #SARBMonetaryPolicyForum #TalkToTheSARB pic.twitter.com/TB9u8zK40m

— SA Reserve Bank (@SAReserveBank) April 6, 2020

(Compiled by Kaunda Selisho)

For more news your way, download The Citizen’s app for iOS and Android.