The SA Daily
26 March 2020
Lockdown, to stem severity
Shireen Darmalingam
- South Africa at midnight tonight will enter a three-week lockdown, shutting down all but essential parts of the SA economy to curb the viral outbreak and prevent what may otherwise be a deeper humanitarian and economic crisis. SA now has 709 confirmed cases, far more in just 20 days after confirmation of the first infection than was the case for other countries (excluding China, Italy, Iran). With an estimated infection rate of 2 (every 1 person testing positive could infect 2 more), the trajectory of confirmed cases could therefore be exponential. However, President Ramaphosa having implemented a lockdown should stem that number.
- Given this dramatic increase in cases in recent days, we now estimate economic growth as contracting by -5.0% in 2020, then likely recovering slightly to -4.6% in 2021. Such poor growth would be far worse than the -1.5% contraction during the global financial crisis. We also see the rand weaker, at R16.00/$ by year-end.
- More immediately, Q1:20 GDP too will likely see a deep contraction, with SA’s goods-producing sectors under strain and discretionary spending severely constrained as consumers are hit hard. The SARB may therefore well provide further relief in Q2:20, even after the bank’s outlier 100 bps cut just last week.
- SA is unlikely to escape a downgrade by Moody’s to non-investment grade; the review of the sovereign will be published tomorrow afternoon. The Moody’s rating is currently Baa3, with a negative outlook.
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