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LOOKING INTO THE CRYSTAL BALL – THE SOUTH AFRICAN ECONOMY IN 2022 Well-known economist Raymond Parsons presents a picture of how the economy will perform this year, given various global and local trends and influencing factors. WHAT 2022 has in store for us is highly uncertain. As a small, open economy, South Africa is vulnerable to volatility both at a global level and closer to home. Domestically, the new year represents another inflection point for the economy. After a likely 5% rebound in GDP growth in 2021, the growth forecasts for 2022 and beyond are conservative – and too low given SA’s immense socioeconomic challenges. The year 2021 was another tough year for the country. Low points include the widespread civil unrest in July, extended periods of Eskom load shedding, intermittent Covid-related lockdowns, the announcement of record-high unemployment figures, the emergence of Omicron and the imposition of various international travel bans on SA. What is the global economic picture telling us? The rapid spread of Omicron across the world is a grim reality, bringing with it additional economic risks and disruptions. In a world that has grown weary of Covid-related restrictions, new lockdown measures are nevertheless being introduced in various countries. Two of the most obvious economic risks in 2022 are now lower global growth and higher inflation (off an already-high base).
Apart from Omicron and its accompanying challenges, two additional reasons for emerging markets like SA to feel vulnerable are the gradual tightening of US monetary policy and a sharp slowdown in the Chinese economy. The global commodity boom seems to be over for now (except for some key SA agricultural exports to China). While the US’s gradual unwinding of its quantitative easing monetary policy may, for various reasons, be less of a shock to emerging economies now than it was in 2013, most of these economies could still be left with unenviable
choices. A hawkish US monetary policy and a strong dollar usually go hand in hand with a declining appetite for risk in global investment markets. Recent developments have given greater prominence to global inflation trends and the interest rate outlook. Interest rates have been raised in several countries. As the world moves into the third year of the pandemic, it is not necessarily all gloom and doom. Adaptive behaviour on the part of people, firms and governments – as well as more vigorous vaccination drives – can help to alter the future trajectory of the contagion. There
