S&P warns recent civil unrest could dent GPD rebound

Business

S&P Global Ratings has warned that the recent civil unrest could slightly dent the expected rebound in gross domestic product (GDP) for 2021.

In a report yesterday, S&P said the civil unrest was a clear example of wide income inequality, increasing poverty levels and poor access to health service.

South Africa has seen experienced widespread looting of retail outlets and manufacturing facilities in KwaZulu- Natal and Gauteng following former President Jacob Zuma.

The estimated cost of the unrest is R50 billion in lost output and placed at least 150 000 jobs at risk.

S&P’s corporate rating director, Omega Collocott, said the unrest has also severely hampered supply chains because of blocked road and rail transportation corridors.

Collocott said the damage to elements of the country’s retail and financial infrastructure, economy, and consumer and investor confidence would take longer to repair.

“It is estimated that the unrest will likely shave about 0.7 percent off headline GDP growth in 2021, hit private consumption, and slow the pace of economic recovery,” said Collocott.

“Nevertheless, we expect that strong commodity prices and the base effect from the contraction in 2020 will continue to support GDP growth.

“If the unrest were to recur and last for a long time, this would further pressure the economy and potentially stifle the rebound.”

S&P ahs forecast that South Africa’s economy will continue to recover and expand by 4.2% this year, because if a rebound in international commodity prices. This was in line with the South African Reserve Bank’s GDP outlook for 2021. Last week, the bank also cautioned about the downward risks to economic growth because of recent supply disruptions and the protracted lockdown.

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