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Economic Measures for COVID-19 Under the Spotlight

May 4, 2020

National Treasury

National treasury has released a document setting out a three-phase approach to government’s economic interventions over the next 18 months.

The “Economic Measures for COVID-19” document emphasises the need for South Africa’s responses to the COVID-19 pandemic to deliver effective healthcare, alleviate hardship and preserve the ability of the economy to recover.

According to treasury, the “immediate priority is to use the joint levers of fiscal and monetary policy to support economic activity and alleviate hardship”.

Reference is made to the risk-adjusted approach to reopening the economy starting with the initial easing of lockdown measures on 1 May.

Treasury stresses that the response strategy must not compromise fiscal sustainability thereby ensuring South Africa’s long-term prosperity.

Going forward, government’s response will “shift towards helping support employment and investment, and to position the economy for structurally higher growth”.

Phase 1 is designed to preserve the economy through a set of immediate, targeted and temporary responses, Phase 2 is a plan to recover from the immediate effects of the crisis by supporting investment and employment and Phase 3 is a pivot to position the economy for the faster growth needed to restore the country’s long-term prosperity.

Treasury highlighted the need for a new local economy post COVID-19.

“Forging a new economy in a new global reality will require a social compact between business, labour, communities and government. It will require far-reaching structural reforms enabling millions of South Africans to participate in building a more productive and prosperous society. It will require steps to reimagine government’s industrial strategy and overhaul state-owned enterprises.”

A special adjustments budget, to be tabled in the coming months, will set out a range of economic reform proposals and measures to stabilise the public finances.

Treasury also points out that specific measures on structural reforms to attain higher growth levels will also be outlined in the adjustments budget and 2020 Medium Term Budget Policy Statement.

Meanwhile, in a statement, government has responded to the decision by S&P Global Ratings to lower South Africa’s long term foreign and local currency debt ratings further into non-investment grade to ‘BB-’ and ‘BB’ respectively.

South Africa’s outlook, however, was revised from negative to stable.

Treasury reiterated the call for structural reforms.

“Now, more than ever, structural reforms need to be urgently implemented in order to get the economy moving in the right direction. Tough decisions have to be made and collaboration between government, business, labour and civil society remains vital in order to contain the spread of Covid-19 and ensure sustainable economic recovery.”