South Africa’s post-COVID-19 economic recovery will depend on several factors, many of which are within the policy maker’s control and others that policymakers will have no control on. For an economy with roughly 60% accounted for by household consumption from an expenditure side, consumer confidence will be critical for the recovery in economic growth. However, this time around, consumer confidence will likely remain depressed and driven by factors that policymakers cannot directly control. This implies that economic growth will not recover quickly even if  the economy is opened up quickly.    ...

On Thursday the Reserve Bank monetary policy committee (MPC) will announce its interest-rate decision. The median expectation from a Bloomberg survey of 19 economists is for a 50 basis point (bp) cut in the repurchase rate from 4.25% to 3.75%....

Looking at investments during the Covid-19 pandemic is so difficult that some have opted to park funds in cash....

Stock markets worldwide have declined into bear market territory. The US S&P 500 is down 20% year-to-date, having reached a low of -31%. The MSCI emerging markets index is down 19% year-to-date, having reached a low 27%. The JSE all share has declined by similar magnitudes, down 22% from a low of 33% year-to-date....

Given what we know now, that there is a near complete lockdown of movement of people and company operations, South Africa’s GDP growth will likely contract by as much as 4% in 2020 due to the impact of COVID-19. This will result in about 1.7 million jobs lost, largely concentrated in manufacturing (940 000), transport (300 000), mining (230 000) and electricity, gas and water, and business services. GDP growth cannot be saved, but some jobs can, in some highly uncertain conditions. ...

Global markets are in turmoil and central banks are responding with emergency interest rate cuts while those countries with fiscal space are putting together stimulus packages primarily geared to healthcare spending to help fight the COVID-19 pandemic. The US Fed cut rates by 50 basis points followed by the Bank of Canada and the Bank of England with similar magnitude of rate cuts. Other central banks including the People’s Bank of China and other emerging markets have done so and already. Conditions dictate that the South African Reserve Bank must support the economy and cut rates by as much as 50 basis points at one go, and even consider deploying macro prudential tools to help those corporates that are experiencing credit and funding stress. ...

SA requires three necessary but not sufficient conditions to propel economic growth from its snail’s pace of the past few years. First, regaining fiscal credibility, which I wrote about in these pages two weeks ago. Second, big-bang structural economic reforms, and lastly continued incentives and policy certainty in mining, land, energy and other areas to attract private sector investment....

The presence of fiscal credibility means that economic agents believe what the fiscal authorities announce as their target primary budget balance, they will achieve in the time frame that they set. South Africa fiscal credibility has deteriorated since the financial crisis, and the risk remains that this could persist if National Treasury continues to miss its budget targets. ...

It is complicated. That’s how one can describe South Africa’s economic outlook for the year given the events of the past three weeks. Encouraging developments globally, though they will not improve our economic growth prospects, and there’s just too much noise locally, devoid of tangible progress on economic reforms tabled by the National Treasury late 2019 as far as implementation is concerned. ...