GDP shrinkage of 12%: It’s not the virus, but the lock-down, stupid!

Johannes Wessels (@johannesEOSA1) & Mike Schüssler (@mikeschussler)

At the end of the initial 3 weeks lock-down a GDP decline of about 5% was considered as quite a catastrophic outcome. Even at that level, it was considered worth the price since delaying the spread of the Covid 19 virus would give a window of opportunity for the health sector to get beds, ventilators and care protocols in place for the spike that would inevitably come.

The minister of trade and industry (dti), Ebrahim Patel, however dismissed the negative projections of economic shrinkage as mere “thumb-sucking”.

After prolonging the hard lock-down with just a gradual easing to level 4 to end May, the growing queues of the hungry waiting for food parcels, the increase in the claims from the unemployment insurance fund and the drastic shrinking of the state’s purse, would make a 5% decline in GDP a dream outcome.

The GDP figures for Q1 2020 will only be known end June. Data from other countries indicate that those whose governments had opted for a hard lock-down are in for excessive economic damage.

Change in GDP trend is the difference between growth in 2019 and 2020 1st quarters, implying that the Philippines that experienced a change of -6% went from 5.9% GDP growth in Q1 2019 to -0.1% in Q1 2020. This chart reveals the following:

  • Countries with a hard lock-down that kept only essential services and providers open, saw an average decline of 5,2% in GDP trend.
Continue reading “GDP shrinkage of 12%: It’s not the virus, but the lock-down, stupid!”

SMEs not the magic “Open Sesame” that unlocks growth & jobs (1)

Johannes Wessels
@johannesEOSA1

Within a week of his inauguration as Finance Minister, Tito Mboweni muttered the magical “Open $e$ame” words that, according to legend, will reveal the treasures of economic growth, job-creation and the eradication of inequality.

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Addressing the Association of Black Securities and Investment Professionals, Mboweni said “to get the economy performing, government needed to create an environment which allowed small and medium enterprises to operate at an optimum level.

“We must think in particular how to support small and medium enterprises. In Germany the economy is driven by the hidden champions that are small and medium enterprises,” Mboweni said.

The religious preacher built his sermon on the inspired text of the syncretic National Development Plan, chapter 3 verses 115 & 139:

Continue reading “SMEs not the magic “Open Sesame” that unlocks growth & jobs (1)”