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SA’s economy to shrink by 7.8% this year

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The effects of Covid-19 extends much further than SA’s health sector as South Africa’s economy is expected to shrink by 7.8 % this year.

The National Treasury said this in its Medium-Term Budget Policy Statement on Wednesday.

The measures that were taken to protect public health (the national lockdown) resulted in sharp declines in consumption, investment and exports.

“GDP growth is expected to rebound to 3.3 % in 2021, and to average 2.1 % over the medium term. Based on this projection, the economy will only recover to 2019 levels in 2024.

“The sharp downturn in the domestic economy follows a decade of economic stagnation, complicating South Africa’s recovery," said National Treasury.

It said over the past 10 years, real GDP growth averaged 1.4 %, while the population grew by 1.6 % per year.

“In this context, there is a need to forge a national consensus through a social compact that addresses both short- and long-term structural growth challenges.

“In recent months, government, business, labour and civil society have developed an economic recovery plan. Recognising that many plans fail to translate into action, the Presidency and the National Treasury have established Operation Vulindlela, an initiative to accelerate effective implementation of structural reforms to boost the rate of sustainable economic growth.”

Read also: Economy: Technical team to fast-track priority reforms

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