South Africa’s 85-Month Downward Cycle May Linger With New Rules

(Bloomberg) -- The South African economy’s ability to recover from its longest downward cycle since 1945 has been dealt a blow by new restrictions to curb surging coronavirus infections.

The economy entered the 85th month of a weakening cycle in December, according to the Reserve Bank’s Quarterly Bulletin released Tuesday. That’s as business and consumer confidence continue to languish at multiyear lows, even after the economy emerged from its longest recession in 28 years in the third quarter, following the gradual easing of a hard lockdown imposed from March 27.

The initial virus restrictions that shuttered almost all activity except for essential services for five weeks forced businesses to close and wiped out almost a decade of job gains, putting the economy on course to contract the most in almost nine decades this year. The latest restrictions announced by President Cyril Ramaphosa Monday night could slow the recovery.

Read more: South Africa Limits Alcohol Sales, Closes Beaches to Curb Covid

The type of restrictions announced by the president “could curtail economic activity in specific sectors or industries to varying degrees,” the Reserve Bank said in an emailed response to questions. “Although this might slow the pace of economic growth, and the recovery, somewhat, it might not have a specific effect on the timing of a lower turning point in the business cycle. This is because the economy has already rebounded from such a low base in the second quarter of 2020.”

The last major declining cycle in the economy lasted 51 months between 1989 and 1993, when the former all-white government renewed a state of emergency and the country prepared for its first democratic elections. The central bank monitors about 200 indicators representing economic processes such as production, sales, employment and prices to determine the direction of the trend.

These are some of the other key points from the Quarterly Bulletin for the three months through September:

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