South Africa’s economy to contract by 7.8% this year.

As a result of the devastating impact of the Coronavirus pandemic, South Africa’s economy is expected to contract by 7.8 % this year in real terms.

The National Treasury said this in its Medium-Term Budget Policy Statement on Wednesday.

This comes after COVID-19 and the measures taken to protect public health resulted in steep declines in consumption, investment and exports.

“GDP growth is expected to rebound to 3.3 % in 2021, and to average 2.1 % over the medium term. Based on this projection, the economy will only recover to 2019 levels in 2024.

“The sharp downturn in the domestic economy follows a decade of economic stagnation, complicating South Africa’s recovery,” said National Treasury.

It said over the past 10 years, real GDP growth averaged 1.4 %, while the population grew by 1.6 % per year.

“In this context, there is a need to forge a national consensus through a social compact that addresses both short- and long-term structural growth challenges.

“In recent months, government, business, labour and civil society have developed an economic recovery plan. Recognising that many plans fail to translate into action, the Presidency and the National Treasury have established Operation Vulindlela, an initiative to accelerate effective implementation of structural reforms to boost the rate of sustainable economic growth.”

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