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'Best-case scenario for GDP in 2020 is a 22% contraction'

25 May 2020 9:36 AM
Tags:
Gross Domestic Product
GDP
Economy
Recession
Refilwe Moloto
economist
Coronavirus
Lockdown
COVID-19
Coronavirus in South Africa
covid-19 in south africa
Economic depression
contraction
Sifiso Skenjana
IQ Business

For 2020, our best-case is about a 22% decline in GDP, warns Sifiso Skenjana, Chief Economist at IQ Business.

Two months of lockdown has devasted the economy and destroyed, perhaps, millions of jobs.

The government has tried to mitigate some of the effects of the lockdown with various relief packages for employees and companies.

However, some of the damage will be structural, meaning the Covid-19 shockwave will ripple through the economy for a while to come.

On Sunday, President Cyril Ramaphosa announced that most of South Africa’s workforce will be allowed to work again from Monday, 1 June.


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Residents of Iterileng informal settlement near Laudium queue for food packages on 20 May 2020. Picture: Abigail Javier/EWN

Refilwe Moloto interviewed Sifiso Skenjana, Chief Economist at IQ Business.

What does lockdown level-three mean for our pulverised economy and the torrent of job losses – will this opening of the economy prevent some of the worst-case scenarios from realising?

Does the opening of the economy go far enough, and did it come too late?

Construction of commercial buildings will now be allowed. It was initially planned for level two.

Sifiso Skenjana, Chief Economist - IQ Business

Commercial and residential building make up about 67% of the earnings in construction… it’s a labour-intensive sector. It also absorbs broadly unskilled labour… the same applies to the trade and wholesale sector… Along with government activity, it takes the labour force participation up to about 50%...

Sifiso Skenjana, Chief Economist - IQ Business

The 7% [contraction in GDP expected by the Reserve Bank] is probably a bit conservative… We’re probably going to see GDP leakage of something in the low-20s…

Sifiso Skenjana, Chief Economist - IQ Business

December tax statistics show… that 380 companies contributed to about 57% of all corporate income tax… If you have one company collapsing, the impact is huge… 800 000 companies were assessed for tax…

Sifiso Skenjana, Chief Economist - IQ Business

For 2020, our best-case is about a 22% decline in GDP…

Sifiso Skenjana, Chief Economist - IQ Business

Listen to the interview in the audio below.


25 May 2020 9:36 AM
Tags:
Gross Domestic Product
GDP
Economy
Recession
Refilwe Moloto
economist
Coronavirus
Lockdown
COVID-19
Coronavirus in South Africa
covid-19 in south africa
Economic depression
contraction
Sifiso Skenjana
IQ Business

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