This is the largest in 90 years!
JOHANNESBURG – The South African economy is now expected to contract by 7.2 per cent in 2020, the largest contraction in nearly 90 years, and inflation will likely register 3 percent in 2020.
Finance Minister Tito Mboweni said on Wednesday when delivering the Supplementary Budget that commodity price increases and a weaker oil price may have softened the blow, but as a small open economy reliant on exports South Africa had have been hit hard by both the collapse in global demand and the restrictions to economic activity.
Mboweni attributed this largely to the Covid‐19 pandemic which has turned the global economy upside down.
“In the February Budget, we expected that the global economy would expand by 3.3 per cent in 2020. We now expect a global contraction of 5.2 per cent this year. This will bring about the broadest collapse in per capita incomes since 1870.
“Throughout the world, tens of millions of workers have lost their jobs. South African unemployment increased by one percentage point, reaching 30.1 per cent in the first three months of this year,” he said.
He said South Africa had responded to this economic shock with an unprecedented set of measures.
“Never before has government worked together so closely with the private sector, labour, community and the central bank. Standing as a united people, it is clear we can achieve anything.
“Government’s Covid‐19 economic support package directs R500 billion straight at the problem. This is one of the largest economic response packages in the developing world. The South African Reserve Bank (SARB) has reduced interest rates and made it easier for banks to lend money.
“The SARB has also supported liquidity in the domestic bond market. The Bank has stated that it stands ready to take additional action, should the need arise. More than 2 million customers have received around R30 billion in relief from their commercial banks.
“Insurers and medical aid schemes have provided premium holidays. Landlords have provided rental relief. All in 100 days. This is indeed a remarkable achievement,” he said.