“The latest lockdown measures are more social than economic – so whilst there will be a negative drag, it will be slight,” said Peter Attard Montalto, Intellidex analyst.
Montalto however warned that there is a bigger issue facing South Africa and her people: the Covid data will get much worse in the latest wave of infections, which could very likely prompt further tightening. The uncertainty about South Africa’s access to a vaccine, and the possibility of a rate cut by the South African Reserve Bank in January makes it incredibly difficult to predict where the economy is headed in 2021.
Assessing the new lockdown measures announced by president Ramaphosa this week, Attard Montalto said that the address was high in emotion, but on paper didn’t shift things around too much.
“The use of the term ‘adjusted alert level 3’ is meaningless – both vs the previous levels and also any sense of what a step to level 4 or level 3 from here would be,” he said.
“The regulations should be viewed in isolation. Overall, the social aspects (gatherings and curfew) are harsher than the previous level 3 but the economic aspects are lighter. We think the phrase is mainly being used for signalling purposes.”
Montalto noted that there was no shift in travel rules – either interprovincial or internationally – and there was no announcements with regards to schools. There was also no information on additional economic support for South Africans or businesses affected by the decision.
The bulk of the focus was on the tourism and hospitality sector, where restaurants will be forced to close earlier due to curfew, and alcohol sales are once again banned.
“We have a lighter lockdown now, but less stimulus support – we still judge it to be a limited, but negative impact on growth. The impacts on growth will be concentrated in the tourism and hospitality sectors with others affected only by weaker sentiment on vaccine uncertainties and worries over what is to come,” Montalto said.
What is likely to come?
“Viewed in isolation as a period of now till 15 January we see this slowing the recovery but not derailing it,” the analyst said.
“We will however likely get a longer period of lockdown now through until, say, start February or beyond – and then further waves later in the year.”
He said that the problem for South Africa is that with social adherence to preventative measures low, and with a large stock of transmissions over Christmas filtering their way through to the data (cases and deaths) in the coming weeks – the data is going to keep getting worse through and after the 15 January assessment.
“Equally, the point of vaccine herd immunity – whatever that is, lets say 60% – is still some way off.
“As such we have a worsening crisis short-run, a strong possibility of a third wave mid 2021, and then a smaller fourth wave into end 2021. Restrictions cannot last this long – but they can be extended; we think well beyond 15 January,” he said.
Thus talk of stronger economic growth in 2021 – around 4.2% – is heavily slanting to the downside, with leanings toward 3.5% seeming much more realistic.