Countries across the globe have faced unprecedented challenges due to the COVID-19 pandemic. As of 3rd June 2020, the World Health Organisation report that there have been over 6 million confirmed cases of coronavirus and 379, 044 confirmed deaths – with 216 countries, areas or territories affected worldwide. In this blog, you will know How has South African GDP and employment have been affected by COVID-19.
With countries enforcing lockdowns to reduce the spread of COVID-19, many businesses have closed their doors, supply chains have been disrupted, the tourism industry paused, and imports and exports affected. This has had a profound effect on the global economy – and South Africa hasn’t been immune to these challenges.
How will South African GDP and currency be impacted?
The country is facing recession, with the South African Reserve Bank (SARB) predicting a significant contraction in GDP for 2020. Sunday World state they have “forecast GDP will plunge by 7% this year, a much steeper decline than the 1.5% contraction recorded in 2009 at the height of the global financial crisis”.
As the economy faces challenges, so too does the value of the South African Rand, which has seen falls against the Dollar, Pound and Euro in recent months. However, the currency’s value has begun to strengthen. Pound Sterling Live reported at the end of May that:
“Analysts at Commerzbank said Monday that USD/ZAR formed a technical top at its all-time high of 19.34 in early April and that it should now fall to between 16.99 and 17.17 over the coming days where it’s seen stabilising, although they did also say the South African unit would remain vulnerable to fresh bouts of weakness unless it can push USD/ZAR below 16.99.”
This is likely to mean traders will see ongoing fluctuations in value and will weigh up potential risk vs rewards surrounding the ZAR.
What are the predictions for the South African employment rate?
At the end of 2019, the employment rate in south Africa sat at 42.40% according to Trading Economics, which is measured on “the number of people who have a job as a percentage of the working age population”. However, this may take a hit this year as a result of the pandemic, as the South African National Treasury recently announced a potentially damaging outlook to the countries rate of employment for the remainder of 2020.
The COVID-19 pandemic could “lead to job losses of between 690,000 and 1.79million” and in “worst-case scenario would push the unemployment rate to over 50%” report BusinessTech. Businesses across various sectors have been affected by the lockdown, including those in construction, catering, travel services and others. However, as lockdown measures ease, economic activity should pick up again.
In addition, President Ramaphosa announced a R500bn recovery package to help support those struggling due to the pandemic. The funding seeks to “protect livelihoods, to stave off hunger and destitution and to set out economy on a path of recovery” he said.
As time goes on, we will be able to see more clearly the long-term implications that the coronavirus pandemic has on employment rates and GDP in the country.