As the country begins to roll out a massive vaccination programme, the Gross Domestic Product (GDP) is projected to grow by a rate of 3.3 percent in 2021.
Releasing the Budget Review for the next three years, the National Treasury said on Wednesday the COVID-19 shock is estimated to have led to a 7.2 percent contraction in GDP growth in 2020.
“The economy has started to recover in response to improved global conditions and the easing of lockdown restrictions and in the months ahead, a mass vaccine rollout will support a full reopening of the economy.
“GDP growth of 3.3 percent is projected for 2021, moderating to an average of 1.9 percent in 2022 and 2023.”
Treasury said government’s balanced and prudent fiscal strategy is designed to stabilise the public finances.
“The 2021 Budget provides continued support to the economy and public health in the short term without adding to long-term spending pressures. Capital spending is the fastest-growing component of non-interest spending.”
The department said the outlook remains highly uncertain and the economic effects of the pandemic are far-reaching.
By the third quarter of 2020, there were 1.7 million fewer jobs than in the same period in 2019.
“Rising unemployment and income losses have entrenched existing inequalities. GDP is only expected to recover to pre-pandemic levels in late 2023. Given South Africa’s structural constraints, its recovery will be slower than many of its developing-country peers,” said Treasury.
Alongside a robust public health response to the pandemic and immediate support to households and businesses, the National Treasury said government’s recovery plan focuses on raising the economy’s long-term growth rate.
“Structural reforms will lower barriers to faster, inclusive growth by improving access to reliable electricity, water and sanitation services; enabling cost-effective digital services; promoting the green economy; and supporting industries with high employment potential, such as tourism and agriculture.
“Given these circumstances, the 2021 Budget strikes a difficult balance between providing immediate support for the economy and shoring up the country’s public finances.”
Treasury said over the next three years, the fiscal policy will focus on:
– Extending temporary support in response to COVID-19;
– Narrowing the budget deficit and stabilising debt; and
– Exercising continued restraint in non-interest expenditure growth while
improving the composition of expenditure.