| Recovering from the pandemic |
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The IMF Fiscal Monitor October 2020 provides interesting information about the possible effects of the COVID-19 pandemic on the state of South Africa’s economy and potential solutions for recovery.
It has been little more than a year since the World Health Organisation declared COVID-19 a pandemic. It is estimated that in the first 6 months of the pandemic USD12 trillion was spent providing support to households and firms.
Some statistics for South Africa.... The fiscal deficit was projected to increase by 8% to -14% of General Government Debt (i.e. debt of national, provincial and local government and related institutions) by the end of 2020. An increase in the debt to GDP ratio by 17% when compared to 2019. General government debt as a percentage of GDP for the next 5 years is estimated as follows: | 2021 | 2022 | 2023 | 2024 | 2025 | | 83% | 86% | 87% | 87% | 85% |
While the numbers seem scary, the IMF has outlined the importance of continuing to provide much needed support despite rising debt globally. The report discusses specific policy trade-offs for governments. The IMF also promotes public investment, particularly in jurisdictions where interest rates are low as this increases the overall affordability and return on projects. Read the full report on the “policies to recovery” here.
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