BUSINESS MAVERICK ANALYSIS: South Africa falls on the wrong side of growth forecasts by the OECD

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It’s good news that the Organisation for Economic Cooperation and Development has upgraded the global growth outlook — but it’s bad news that South Africa falls on the wrong side of a growing divergence in the economic fortunes of different countries in the world. Deteriorating business confidence adds to the worrying outlook.

The Organisation for Economic Cooperation and Development paints a much rosier picture for overall global growth over the next two years, upgrading 2021’s forecast by a percentage point. But in its latest economic outlook, it highlights a growing divergence in regional and country economic fortunes — with South Africa on the wrong side of the forecasts.

Whereas the world outlook has improved by 1.4 percentage points to 5.6% in 2021, according to the OECD, South Africa’s has slipped 0.1 percentage points to 3%. Our slow progress on the vaccine front, relative to other countries in the OECD, is likely to have been one of the key contributing factors to the downgrade in our growth outlook because the “deployment of effective vaccines” was one of the key contributors to what the OECD terms the faster-than-expected rebound from the pandemic.

The other must-haves the OECD identified as vital to continued growth include fiscal policy support, “with new policy measures implemented promptly and fully if required”, and the maintenance of the current very accommodative monetary policy stance”. As shown in the graph below, the organisation quantifies the lasting cost on world growth to be 2.25% behind the late 2019 forecast at the end of 2022.

 

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