Saturday, May 15, 2021

New Covid-19 strain may further constrain growth in 2021

The Covid-19 virus stole our Christmas. Now it has mutated into a new strain which is spreading like wild fire.

As we enter the new year, economists aren’t too sure about their forecasts.  

The World Bank forecasts the global economy will expand by just four percent in 2021. The Bank pins its hopes on vaccine deployment throughout the year with emphasis on investment as key to sustaining the recovery. 

After Covid-19, economies must get set for technology driven boom as the office space is one of the most likely to suffer due to the new normal of work from home and much online usage. That’s the one key investment area to consider.

The World Banks’ January 2021 Global Economic Prospects this past week said recovery is likely to be subdued unless policy makers move decisively to tame the pandemic and implement investment-enhancing reforms.

The World Bank Group President David Malpass indicated: “While the global economy appears to have entered a subdued recovery, policymakers face formidable challenges—in public health, debt management, budget policies, central banking and structural reforms—as they try to ensure that this still fragile global recovery gains traction and sets a foundation for robust growth.”  

He further added: “To overcome the impacts of the pandemic and counter the investment headwind, there needs to be a major push to improve business environments, increase labor and product market flexibility, and strengthen transparency and governance.”

This January’s latest research pointed that, the collapse in global economic activity in 2020 is estimated to have been slightly less severe than previously projected, mainly due to shallower contractions in advanced economies and a more robust recovery in China. In contrast, disruptions to activity in the majority of other emerging market and developing economies were more acute than expected.

According to the World Bank, the near-term outlook remains highly uncertain, and different growth outcomes are still possible. A downside scenario in which infections continue to rise and the rollout of a vaccine is delayed could limit the global expansion to 1.6 percent in 2021. Meanwhile, in an upside scenario with successful pandemic control and a faster vaccination process, global growth could accelerate to nearly five percent.

Here at home, there is an imposed one-month curfew with a possibility of a possible national lockdown in the near future, as information by the Director of Health shows further high-risk posed by Covid-19 in the country. With the curfew in place, it has already started affecting other businesses which were starting to pick from last years’ three months of national lockdown. 

Botswana’s economy shrank by 2.4 percent in the second quarter of 2020 as coronavirus lockdowns at home and abroad slowed domestic economic activity and severely constrained diamond sales. Buyers of the precious gem stones were locked out of the capital Gaborone, where they come to purchase diamonds from De Beers.

In October 2020, the Finance Minister, Dr Thapelo Matsheka projected the Botswana economy to rebound and grow by 7.7 percent in 2021 from an 8.9 percent contraction forecast for 2020 on the back of improved sentiment in the global diamond industry.

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