According to the country’s finance minister, Enoch Godongwana, the economy urgently needs to fund the fair energy transition, repair infrastructure, and enhance development prospects.
This occurs at a time when the crisis between Russia and Ukraine has intensified inflationary pressures via rising oil and food costs, prompting a swift tightening of monetary policy while increasing budgetary pressures.
“The price of gasoline virtually quadrupled between February and June, placing tremendous strain on South Africans’ already strained earnings.
“Inflation is at its highest level in 13 years. Consumer inflation overall increased sharply in July 2022, reaching 7.8%. In contrast, the first half of 2022 had an average growth rate of 6.2%, according to Godongwana.
On Thursday at the Cape Town International Conference Centre, the Minister gave the keynote lecture at the Government Employees Pension Fund (GEPF) Annual Thought Leadership Conference 2022.
According to Godongwana, the conflict between Russia and Ukraine has heightened geopolitical dangers in light of the future of the world economy.
The global economy was just starting to recover from the COVID-19 epidemic when this happened. “The conflict is likely to obstruct international commerce and collaboration and increase geopolitical fragmentation,” he added.
In addition to the terrible loss of life and the devastation of livelihoods, the conflict, according to the minister, is likely to impair global commerce and collaboration and increase geopolitical division.
He described how the availability to food, energy, and finance crises are contributing to the Russia-Ukraine war.
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He said that the war is a potent illustration of how economies are intertwined, taking into account both the domestic economic outlook and the influence of the geopolitical backdrop on South Africa’s economy.
“The sanctions imposed on Russia as a result of this escalation severely affected our expectations for the domestic picture.
According to the Minister, “the war has generated a new set of multifaceted dangers to our economic outlook and to fiscal and monetary policy,” and it has also made the supply chain constraints that the COVID-19 outbreak brought about worse.
The Minister said that rising interest rates and growing inflationary pressures had affected disposable income, hampered attempts to reduce poverty, and had a detrimental effect on consumer spending, economic development, job creation, and food security.
“We have already seen how these changes have affected the most recent GDP figures.
“The second quarter of 2022 saw a 0.7% decline in growth after a first quarter real GDP result that was more favourable. Notably, consumer spending also decreased.
The rand has had one of the worst performances versus the dollar since February, falling from around 14 rands to 18 rands per US dollar.
“This has significantly impacted both the price of our imports and the expense of our debt. Our external account just went negative for the first time in a long time last week.
Godongwana said that while the cost of commodities has started to decline, the cost of coal, one of our main exports, has been rising.
The Minister informed the gathering that the last two years have shown that change is accelerating.
“We have also discovered that although this fast shift entails a lot of hazards, it also presents opportunity for us to enhance the way we do our business and better position ourselves for the changes that lie ahead,” the speaker said.
Godongwana also challenged the gathering to think about and suggest approaches the GEPF and government may collaborate on to address these issues.
We have a higher chance of success if we work together, he added, since our destinies are interwoven. – SANews.Gov