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TIPS The economy and the pandemic 24 August - 6 September 2020


KEY FINDINGS
On the pandemic
• The number of new diagnoses of COVID-19, which started to decline rapidly in mid-July, levelled out at an average of just over 2 000 a day in the week to 6 September.
In contrast to the move to Levels 4 and 3, however, three weeks after Level 2 started on 18 August reported infections had not risen sharply.
• A review of international data shows that countries with higher reported death rates from COVID-19 can also expect a sharper economic decline. Countries with lower
death rates, in contrast, generally also had better economic results. The lowest reported death rates emerged in two kinds of countries: in states that controlled the
spread of the pandemic through strong public health measures; and in low-income economies characterised by limited international air links, largely rural populations,
and low testing rates.

On the economy
• The move to Level 2 brought an initial increase in economic activity. Overall, the available indicators suggest that economic activity has returned to around 10% below
pre-pandemic levels. The Western Cape, however, continues to lag behind.
• The recovery has run up against loadshedding by Eskom. Yet government expects to finalise its emergency acquisition of 2 000 MW of new power from private suppliers
only in mid-2022.
• Case studies of steel and tourism underscore that economic recovery will require more than broad government measures to control the pandemic, stimulate demand and fix
the electricity supply. In many industries, new business models are required to survive, and that imposes tough choices around write-offs of assets and employment. The
particularly stark challenges facing tourism help explain the relatively slow recovery of the Western Cape economy.

Read more: TIPS The economy and the pandemic 24 August 2020 - 6 September 2020