Don’t assume economy will bounce back after lockdown says CDE
PARKTOWN – A local organisation released the first of its new series focusing on the Covid-19 crisis.
The coronavirus and the lockdown have had an effect on South Africa’s economy. The Centre for Development and Enterprise (CDE) based in Parktown recently compiled a report which looks at a discussion around the shape of the economy’s recovery.
Read the full report here.
Inspired by comments made by Professor Paul Romer in a recent webinar on the impact of the Coronavirus on the US and how to think about the preconditions for opening the economy after the lockdowns, this report seeks to warn policy-makers of certain aspects.
The report warns policy-makers not to assume that the economy that emerges after the lockdown will be capable of generating even the rate of growth that South Africa experienced over the past decade. It suggested that the damage done by the epidemic may necessitate very significant economic reforms if South Africa is ever to fully recover. One way to think about this is to think about what happened after the global financial crisis (GFC).
Here are some of the points the report made:
- South Africa’s economic growth rate collapsed after the global financial crisis and has never properly recovered. Slow growth after the global financial crisis is the main reason that unemployment and poverty have risen, that public finances ‘are a mess’ and that the country can afford so a ‘paltry’ response to the current pandemic.
- In the decade after the global financial crisis, South Africa experienced a 60 per cent reduction in average annual growth compared to annual growth in the previous decade. This means that it missed out on output valued at R3.7 trillion between 2009 and 2019.
- Estimates of the size of the economic contraction for 2020 range from 4 per cent to 15 per cent of the Gross domestic product (GDP).
- The Covid-19 crisis means that South Africa may permanently lose some of its industrial and commercial capabilities.
- It is vital that the recovery from the Covid-19 crisis not be a repeat of the global financial crisis. The damage incurred by the pandemic requires significant economic reforms if South Africa is ever to fully recover.
