2022 holds enormous promise, most strikingly because it should mark the end of the pandemic.
Further, the strengthening economic recovery will inject added cheer, and notwithstanding the occasional tremors in financial markets. Indeed, the global economy will grow above trend this year; the receding pandemic, coupled with strong household finances in key markets, is central to this prognosis.
With respect to sub-Saharan Africa, the region will grow by 4% this year. Economic performance will be underpinned by the recovery in global trade and from elevated commodity prices, alongside favourable agricultural harvests in southern and east Africa. Moreover, the reduction in Covid-related restrictions will buoy retail trade.
On the outlook for South Africa, high levels of immunity against severe Covid-19 have encouraged increased personal mobility and thereby hastened the economic recovery. To be sure, economic output has improved markedly since the nadir of early 2020 and is now approximately 1% below pre-pandemic levels.
International growth has been a boon, while, locally, household spending has been core to the recovery. Additional boost to growth may emerge from inventory re-building and from a tourism bounce-back.
With respect to the rand, we judge the currency to be at about fair value against the US dollar at present, and we anticipate 75 to 100 basis points of cumulative interest rate hikes by the Reserve Bank this year.
Overall, South Africa’s long term economic prospects will hinge on broader institutional and macroeconomic reforms, to avoid South Africa remaining locked in a low-growth trap. As a result, the government will have to be far more assertive in its actions to convince citizens and investors that the reforms required to accelerate economic growth is a core near-term ambition.
Chief Economist, Standard Bank Group
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