MOMENTUM Investments is the latest institution to revise down South Africa’s growth prospects and has factored in the possibility of a fourth wave of Covid-19 into their forecast.
The downward revision comes as the economy has been stymied by the impact of level 4 lockdown restrictions and the weeklong disruption of supply chains in July, some of which is ongoing. Van Tonder said their forecast factored in the possibility of a fourth wave of Covid-19 later in the year.
The National Institute of Communicable Disease predicted recently that the third wave would likely peak in most provinces by mid-August, while other health experts have said a fourth wave was possible as early as October.
Momentum Investments yesterday lowered its 2021 gross domestic product (GDP) forecast by 0.4 percentage points, from 4.4 percent to 4 percent on economic headwinds. Momentum economist Johann van Tonder said growth in the third quarter would be negatively affected by the institution of level 4 lockdown restrictions and property-damaging riots, which left a R50 billion hole in the economy.
“Everything depends on the speed of the recovery, the speed of insurance claims, the speed at which supply chains recover, and the speed at which infrastructure is repaired,” he said. The recent violence has also likely dampened consumer and investor confidence and stymied the recovery in the labour market, putting thousands of jobs at risk.
The riots could have fuelled the spread of Covid-19 infections, raising prospects of a protracted lockdown. Vaccinations remain the primary tool to get the virus under control and move past stringent lockdowns.
Momentum is one of the few financial sector institutions to make a conclusive estimate of the economic destruction of the riots and the negative impact of restrictions during the difficult month of July.
Last month, PricewaterhouseCoopers slightly revised down its GDP growth forecast from 2.7 to 2.3 percent for this year.
The SA Reserve Bank cautiously maintained its 4.2 percent GDP outlook for 2021, but warned the supply disruptions and protracted lockdown could result in downward risks to economic growth. Old Mutual, on the other hand, maintained expectations of a strong rebound of up to 5 percent GDP growth this year, partly from the terms of trade, and partly from agriculture.
NKC African Economics yesterday also said the South African economy’s better-than-expected start to the year had been ruined by recent events. The research group revised its South African GDP forecast even lower than Momentum.
NKC senior economist Pieter du Preez said the third wave of infections and the subsequent containment measures, and disruption of supply chains were major concerns in July.
“Taking recent events into consideration, we have revised South Africa’s economic growth forecast lower to 3.8 percent for 2021, from a previous forecast of 4.3 percent,” Du Preez said.
“The medium-term forecast is also hampered by a knock in investor confidence and the lack of fiscal space, which will crowd out fixed investment expenditure.”
BUSINESS REPORT ONLINE