How lockdown hurts economy
DOWNTURN: SOUTH AFRICA HAS SEEN A BUDGET SHORTFALL OF R52.1 BILLION IN APRIL
Car manufacturing body reduces its domestic new vehicle sale forecast by 23%.
As the lockdown eases today, data for April is proving just how bad the economy was hit by regulations that shuttered almost all activity except essential services during that month.
The trade balance swung to a record deficit in April. That was mainly due to a 55% slump in exports as the lockdown stifled mining activity, which accounts for about half of the South Africa’s outward shipments, and as restrictions abroad weighed that demand from most trading partners.
Disruptions at ports
Disruptions at ports also affected trade in manganese, iron ore, coal and most bulk shipments, the Minerals Council of South Africa said on Friday.
The export of mineral products, which includes coal and iron ore, dropped by 39%, while precious metals and stones and base metals fell by more than 60%.
Business closures because of the lockdown and steps announced by the South African Revenue Service to give more time for tax payments to be made led to a budget shortfall of R52.1 billion in April, the first month of the government’s fiscal year.
While Finance Minister Tito Mboweni will only present an adjustment budget later this month, he has said the tax take could fall by 32%.
Credit extended to households dropped month-on-month for the first time in three years. That was despite the central bank lowering borrowing costs by 225 basis points from the start of the year to the middle of April.
The value of credit-card purchases dropped to a nine-year low.
“The economic fallout from the implementation of measures to contain the spread of the Covid-19 pandemic is envisaged to include job losses or salary reductions,” said Kamilla Kaplan, an economist at Investec Bank.
“This will erode households’ ability to service debts.”
Sales slump
The sale of new vehicles dropped by 98.4% in April – the most on record – as car dealerships had to close their doors for the full five weeks of level 5 lockdown.
Although auto dealers started trading again from May 1, subject to conditions, sales probably dropped by 86.3% in May from a year ago, according to the median of six economists’ estimates in a Bloomberg survey.
The National Association of Automobile Manufacturers of South Africa has reduced its domestic new vehicle sales forecast by 23% to 405 000 units for the year, saying demand will continue to remain under pressure until there is greater economic stability. – Bloomberg