Answer to Question #240203 in Macroeconomics for Sihle

Question

Covid 19 has caused an economic shock around the globe. Most important economic indicators are widely affected by the chock.

Discuss the economic effect of covid 19 on employment, output and Inflation in South Africa.


Given the nature and effects of covid 19 on employment, output and Inflation, how should policy makers respond to covid 19?

Answer 1

The Covid-19 pandemic, which was caused by a novel coronavirus, is currently affecting South Africa's economic fortunes. The economic consequences of South Africa's lockdown tactics are significant. The impacts of the epidemic in the rest of the globe, and hence on demand for South Africa's exports, are less severe than those of the internal lockdown, but they are nevertheless significant by any standard.

Even the ‘Quick' recovery scenario ends in a GDP decline of around 5% by the end of 2020, an economic outcome that would have been catastrophically disastrous just a month ago. Instead, that conclusion now appears to be promising. Rather, the Covid-19's effects appear to be more likely to remain, bringing GDP outcomes closer to those stated in the ‘Slow' and ‘Long' sections.

There were two major policy implications in addition to describing economic impacts. First, in this time of crisis, South Africa's transfer programs for low-income households are providing critical assistance to the most vulnerable. Efforts to keep these payments in place will significantly reduce the financial burdens placed on low-income families. Second, because the measures enforced to limit the coronavirus have tremendous economic repercussions, it is a good idea to coordinate containment efforts with economic policies meant to somewhat mitigate those policies' negative economic consequences.

The exact economic measures that should be implemented to mitigate the pandemic's consequences—how to put the economy on life support, minimize the damage, and provide the groundwork for a speedy recovery once the pandemic has passed. Overall, focus should now shift to devising a long-term strategy for managing the pandemic that includes both the health and economic aspects of containment.