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The Economy And The Pandemic

29 July 2020 – Trade and Industrial Policy Strategies’ (TIPS’s) ‘Tracker: The economy and the pandemic’ highlights important trends in the Covid-19 pandemic in South Africa and how they affect the economy.

Key Findings For The Week
The number of diagnosed new cases levelled out in Gauteng and Eastern Cape in the past ten days and continued to decline gradually in the Western Cape. As a result, the number of active cases reported declined in the past week for the first time, despite escalating growth in KwaZulu-Natal and the Free State.

The reasons for the decline in reported active cases remains unclear, and it may not be sustained. In any case, unless the number of cases starts to fall more rapidly, South Africa will be living with a very high rate of cases per person by international standards for some time. That in turn makes it harder to control transmission generally. Moreover, it means individuals face higher risks than a month ago, especially in Gauteng, the Western Cape, the Eastern Cape and KwaZulu-Natal.

The Medical Research Council has found that the total deaths from natural causes has climbed by over 12 000 above the expected number of deaths at this time of year, even after taking into account reported deaths attributed to Covid-19. This pattern reflects a common experience internationally. It typically arises because more people have died at home during the pandemic either without a Covid-19 diagnosis or because they avoided getting treatment for some other ailment due to fear of contagion.

On The Economy
As in other countries, the sharp increases in reported new cases and lower employment and incomes appear to be weighing down the economic recovery. The available indicators point to a slight fall in household consumption over the past two weeks. In the longer run, the South African Reserve Bank now expects a 7,2% downturn for the year.

From March to May, consumer prices in South Africa dropped by 1%, and inflation from May 2019 to May 2020 fell to 2%, lower than any time since 2005. But food prices rose 4,5% from March to May, offset mostly by the sharp fall in global oil prices. As a result, the lower-income group, which spends more on food and less on petrol, experienced higher inflation than the richest 10% of households.

International experience continues to demonstrate that, as in South Africa, economic recovery can be heavily set back by ending restrictions on risky activities before the virus is under control. In this context, the often-cited trade-off between lives and livelihoods turns out to be misleading. The real challenge is to cushion low-income households as far as possible from the economic slowdown. Source (Engineering News)