The economic effects of Moody’s recent credit ratings downgrade have been overtaken by the whirlwind effects of the COVID-19 crisis. It is, however, also important to understand the likely effects of the downgrade, which vary for different sectors and stakeholders, to ensure a reasoned response. This policy brief looks at the economic impacts of the decision. It also considers the policy implications. While the ratings agencies have indicated that changes in economic policies and practices could reverse the downgrade, these policy demands on South Africa are contradictory. They suggest that, to improve its credit rating, South Africa must reduce worker protections, limit land reform, and cut government spending. However, these measures would all in turn aggravate social inequalities and policy contestation, increasing investor uncertainty and risks over the long run.
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Daily Maverick - 3 April 2020 by Gaylor Montmasson-Clair (TIPS Senior Economist)
The South African economy is affected by the COVID-19 pandemic through:
These measures brought an extraordinarily sharp decline in global production and
employment, especially in the US and Europe, over the past month. The result will likely be a global recession, with very uncertain prospects for recovery despite the adoption of extremely large stimulus packages in the US and much of Europe.
This briefing note first outlines the progress of the pandemic internationally and in South Africa. It then summarises key economic consequences, which have led to (widely varying) projections for global and South African growth. A final section reviews international and South African economic policy responses to the sharp slowdown.
The economic impacts of COVID-19 are changing rapidly. Information in this briefing note is valid as of 26 March 2020.
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