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What’s in store for SA in 2021?
As 2020 draws to a close, many discussions will be about the year ahead and what awaits the South African economy on the other side. Third quarter GDP numbers will be coming out next week Tuesday. Will South Africa’s growth rebound or will growth remain depressed? Lukman Otunuga, Senior Research Analyst at FXTM joins CNBC Africa for more.
Thu, 03 Dec 2020 10:34:36 GMT
Disclaimer: The following content is generated automatically by a GPT AI and may not be accurate. To verify the details, please watch the video
AI Generated Summary
- The third quarter of 2020 saw a rebound in the South African economy, but concerns remain about the psychological impact of COVID-19 on consumer spending and the effectiveness of monetary policy in sustaining growth.
- Projections for the third quarter GDP numbers are below 50%, reflecting mixed economic metrics and rising unemployment rates, coupled with external risks influencing South Africa's growth potential.
- 2020 is expected to show a significant contraction, with estimates around minus 8%, while the recent double credit downgrade poses challenges for borrowing and business sentiments, impacting the outlook for 2021.
As 2020 draws to a close, many are looking towards the future and wondering what lies ahead for the South African economy. The third quarter GDP numbers are set to be released, and experts are trying to gauge whether the country's growth will rebound or remain depressed. Lukman Otunuga, Senior Research Analyst at FXTM, offered insights into the potential outcomes and challenges facing South Africa in the coming year. Otunuga highlighted the impact of various factors such as the COVID-19 pandemic, government policies, and external risks on the country's economic trajectory. With a mix of optimism and caution, he discussed the potential scenarios for the third quarter of 2020 and the outlook for 2021. Let's delve into the key points discussed in the interview. The third quarter of 2020 saw a rebound in the South African economy, with estimations ranging from 45 to 50 percent. This recovery was attributed to the lockdown restrictions being lifted, making it cheaper to borrow and encouraging business investments. However, the psychological impact of COVID-19 on consumer spending could affect these estimations. Despite the optimistic rebound, there are concerns that monetary policy alone may not be sufficient to fully revive the economy. The upcoming presidential address and potential policy changes may also influence the economic trajectory. Otunuga's projections for the third quarter GDP numbers are below 50%, citing mixed economic metrics such as muted retail sales and rising unemployment rates. He emphasized how external risks and policy decisions could impact South Africa's growth potential. The 2020 economic figures are expected to show a significant contraction, with estimates around minus 8%, marking one of the worst contractions in nine decades for the country. The recent double credit downgrade could further complicate borrowing and business sentiments, affecting the outlook for the fourth quarter and 2021. Otunuga pointed out that the global economic challenges, coupled with South Africa's domestic issues, have created a tough environment for recovery. Looking ahead to 2021, Otunuga identified the development and distribution of a COVID-19 vaccine as a key factor that could positively impact growth. The potential rollout of a vaccine could boost economic recovery and provide a glimmer of hope for South Africa and other emerging markets. Otunuga also touched on the performance of the South African Rand, noting its recent appreciation against major currencies. The Rand's resilience in the face of external challenges and its potential for further strengthening were discussed in relation to broader market sentiments and risk appetites. Otunuga highlighted the importance of monitoring the Rand's movements closely and how it reflects investor confidence in South Africa's economic prospects. Overall, the interview shed light on the complex interplay of internal and external factors shaping South Africa's economic outlook for 2021.
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