South Africa is set to emerge from the COVID-19 (coronavirus) crisis weaker than when it entered it despite its solid response to the pandemic, says a World Bank report released today. The report suggests simultaneously implementing policies that preserve macroeconomic stability, revitalize the jobs market, and improve the investment climate to build a more inclusive economy after the pandemic. The World Bank projects the gross domestic product (GDP) for South Africa to rebound to 4 percent in 2021, propelled by the strong global recovery and favourable commodity prices. However, the country’s growth outlook is uncertain with major risks around the path of the pandemic. For 2022, GDP growth is projected to slow to 2.1 percent and 1.5 percent in 2023, suggesting that the average South African will be worse off in 2023 compared to 2019. However, the global recovery presents an opportunity for the Government to address the well-known structural constraints to its growth prospects and to lift the country onto a higher and dynamic growth path. (World Bank, 2021).

Questions

1. Briefly discuss the effects of COVID-19 on the South African economy and the factors that limit the full recovery of the economy to pre-pandemic levels. Make sure to discuss the structural constraints in South Africa.
2. Provide a brief review of the theoretical and empirical literature on appropriate macroeconomic policies during recessions.
3. Collect data on South Africa’s gross domestic product (GDP) growth, gross fixed capital formation as a share of GDP, gross national expenditure as a share of GDP, and gross savings as a share of GDP for the period 1997- 2021 and plot the variables on a graph. Briefly discuss their evolution over time and the observed relationship.
4. Present at least two policy recommendations for the growth of the South African economy. Be sure to discuss the relevant policy and provide economic explanations on how the policy will promote economic growth.

Answers to Above Questions on Economics

Answer 1: Covid-19 has its effect throughout the world economy and it has also significantly affected the South African economy. The major blow to the South African economy is witnessed in the form of low level of employment and a decade of weak job creation. The impact is worse especially in the case of low wage workers, even though the government of South Africa has undertaken initiatives with the objective of enhancing the income level of its people. There are many factors that affect the recovery of the economy to the pre pandemic levels. These are …..