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Economic recovery: Markets react well after mask mandates were scrapped
The announcement bodes well for economic activity which recovered better than expected. However, two other factors will weigh heavily on growth in the coming months.
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Health Minister Joe Phaahla’s announcement on the scrapping of masks on Wednesday was warmly received by the markets.
“The announcement bodes well for economic activity which recovered better than expected in Q1 2022,” said financial planning company Alexander Forbes in its weekly forecast newsletter.
On Wednesday 22 June 2022, three regulations were repealed which include surveillance conditions, the normal operation of tourism and the entertainment sectors.
“As such, people are no longer required to wear masks in public indoor spaces, there are no limits on the size of gatherings and proof of vaccination or negative PCR test results are no longer required,” said the company.
The decision comes after all major Covid-19 indicators, such as daily cases, hospital admissions and test
positivity rates have lowered significantly since the peak of the fifth wave of infections, rendering the disease endemic in SA.
“Meaning there is greater need to mitigate the risk of the virus rather than contain it,” said Forbes.
However, the company warned that the KwaZulu-Natal floods and Eskom’s continued inability to secure electricity generation will weigh on economic growth in the coming quarters.
Eskom has moved the country to stage four load shedding this weekend, siting worker disruptions at its aging, manually operating power plants.
“We expect load shedding to continue well into 2023 given the first phase of renewable energy projects,” said Alexander Forbes
The Department of Minerals and Energy expects the recently licensed distributed generation projects to be completed at the end of 2023.
Meanwhile, the country’s consumer price inflation rate (CPI) surged to 6.5% year on year in May 2022 from 5.9% the previous month, the highest level since February 2017.
The major contributors to this come from rising costs in food and non-alcoholic beverages, housing and utilities, transport, and miscellaneous goods and services.
“The higher inflation data print will force the SARB to continue with their gradual monetary policy tightening next month as they try to bring inflation back to their target of 3% to 6%, joining other major central banks,” concluded Forbes.
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