The more that the free movement of people and goods between South Africa and China shuts down due to the coronavirus outbreak, the great the threat to the South African economy, warned Nedbank economist Walter de Wet on Monday.
A lot of South Africans, though, maybe enjoying a false sense of security now as the rand rebounded slightly on Monday and there have yet to be any significant knock-on effects from the reduction in trade and travel between the two countries. “The real impact of negative Chinese growth will not be felt immediately in places like South Africa,” he said.
A slowdown in the Chinese economy, which was well underway even before the coronavirus brought much of the country to a standstill, will have potentially dramatic knock-on effects for South African raw material exports to China. De Wet on Monday published a forecast of how just a 10% decline in South African exports to China would be felt across the economy.
Let’s just say it’s not pretty.
Highlights of Nedbank Economist Walter de Wet’s Forecast of the Economic Consequences of a 10% Decline in SA Exports to China
- THE RAND: “A decline in Chinese exports should result in a weaker rand than what may otherwise have been the case.”
- GDP: “South Africa’s GDP growth declines by 38bps. Given that Nedbank expects South Africa’s GDP growth to average 0.8% in 2020, a 38bps decline in growth is substantial.”
- THE DEFICIT: “The budget deficit widens by almost 30bps on the back of weaker growth and lower tax revenue.”
Read more about Walter de Wet’s forecast on the BusinessTech website.
