COVID-19: Are We Asking the Right Questions about the Nature of the Economic Recovery?

No-one knows what the long-term economic effects of the Covid-19 epidemic will be. The massive disruption attendant on a global lockdown has thrown supply chains into turmoil, pushed tens of millions of the workers into (at least) temporary unemployment, and caused financial markets to gyrate wildly. The future effects are radically uncertain and all but impervious to serious modelling, not least because so little can be known for certain about the evolution of the epidemic itself and how societies will respond, much less how these will impact on the economy in the short, medium and long terms. What is certain is that South Africa’s economy will shrink this year relative to last year. In this context, two key concerns for policy-makers, firms and banks is what effect it will have on South Africa’s economic output and how quickly will we recover. Estimates of the size of the contraction that we will experience this year range from 4 per cent to 15 per cent of GDP depending on whom you ask and whether you look at their most optimistic or most pessimistic scenarios.