South Africa’s economy is likely to grow by 2.1 per cent in 2022, reverting to where it was before the COVID-19 pandemic began in 2020, the World Bank has forecast, but warned that constraints on long-term growth, large-scale unemployment and inequalities still persisted.
“Growth in South Africa is forecast to revert to its pre-pandemic trend, with the economy projected to grow by 2.1 per cent in 2022 and 1.5 per cent in 2023,” the Global Economic Prospects report, which was released on Wednesday said, citing improved control over virus outbreaks along with more widespread vaccinations as the main reasons for the improved projection.
Last month, Fitch ratings revised South Africa’s outlook to stable from negative, after it observed that a recovery was under way and the GDP now seemed to be on track to return to pre-pandemic levels during 2022, notwithstanding a 1.5 per cent quarter-on-quarter contraction in 3Q 21, which was partly triggered by unrests last year.
In July 2021, South Africa witnessed large-scale looting and arson in two provinces, which were sparked after former president Jacob Zuma was sentenced to a 15-month term for contempt of court.
“Growth in South Africa is estimated at 4.6 percent in 2021—more than a full percentage point above June projections — reflecting a strong rebound in mining, manufacturing, and services sectors. The recovery slowed in the second half of 2021 owing to severe COVID-19 outbreaks, power outages, and a rise in social unrest,” the World Bank report said.
South Africa has stepped up its vaccination programme and expects that a third of the adult population would be vaccinated by the first quarter of 2022.
“(This is) expected to continue to support the recovery in services sectors, including tourism. In fact, the (South African) government is easing mobility in restrictions as the Omicron wave ebbs and the levels of vaccination increase,” the report said.
It stated that although some economies such as Mauritius had started recovering its tourist trade from October last year, remaining travel restrictions as well as the reintroduction of curbs on international travel to contain the spread of the Omicron variant held back the recovery of tourism to pre-pandemic levels in many sub-Saharan economies .
Earlier this week, the tourism minister Lindiwe Sisulu welcomed the removal of South Africa from the European Union’s Red List for travel, but lamented the country’s loss of over a billion rands from tourism due to the travel ban slapped by the UK within hours of South African scientists announcing the discovery of the Omicron variant in November last year.
The UK is South Africa’s biggest tourism market, especially in the December holiday season.
The World Bank has also listed some other challenges to South Africa’s growth, which includes large-scale unemployment, high inequality and structural impediments to growth.
Many constraints on long-term growth in South Africa predate COVID-19, including the legacy of weak public finances and slow implementation of reforms needed to boost productivity and employment growth, it said.
“Rising government debt and debt service costs will continue to constrain policy space and curtail public spending, leaving gaps in essential public services and infrastructure as a major obstacle to stronger potential growth,” the report said.
It added that the pandemic has reversed at least a decade of gains in per capita income in almost a third of the sub-Saharan region in Africa.
“(In) Angola, Nigeria, and South Africa, per capita incomes are forecast to be lower in 2022 than a decade ago. After barely increasing last year, per capita incomes are projected to recover only at a subdued pace,” it added.