OECD forecasts 8% GDP contraction for SA economy

The economy is under severe strain due the global Covid-19 pandemic and the subsequent lockdown. 

The OECD released the country’s economic survey on Friday looking at the current economic situation, including the impact of the pandemic. 

Director of Country Studies at OECD Alvaro Pereira said the report found that the economy could shrink between 7.5 and 8% if the pandemic doesn’t ease up.  

“Even before Covid-19 we were talking about it but obviously Covid-19 just aggravated the issues in many, many countries – restoring fiscal sustainability. 

“But it’s also very important to take into consideration the fiscal difficulties that South Africa has. We want to create more jobs and to create more growth. South Africa still has too many barriers.”

He added: “South Africa cannot afford to delay reforms. It is essential to undertake reforms to restore long-run fiscal sustainability and growth, while continuing to support the economy in the short run.” 

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National Treasury Director-General Dondo Mogajane said he believes Treasury’s supplementary budget will assist in addressing some of the recommendations made in the survey. 

“I can only sum it up in one word – fiscal sustainability is important and our future as a country is dependent on how responsible we are on how we spend public resources. 

“Our progress on the fundamental challenges of unemployment, poverty and inequality remains insufficient and the roots of growth challenges are well understood. 

“Fiscal sustainability is key and paramount. We believe that we said at the time of the supplementary budget is a good way of ensuring that some of the challenges that are outlined in the survey that will make it easy for us to address the needs of our people.” 

The OECD also hailed the South African government for its monetary policy response the pandemic, with the 300 point repo rate cut since the start of the year. 

Listen to Mogajane below: