Medium-term Budget: Economic growth prospects remain bleak: Inadequate electricity supply and the effects of the Covid-19 pandemic remain a binding constraint on economic recovery in the near term, says the treasury
The combination of inadequate electricity supply and the effects of the pandemic on employment is expected to continue to limit the speed of economic recovery and growth.
On Thursday, the treasury said the risk of power cuts remained high and the only way to reduce pressure on the grid, support higher investment and lower the risk of load-shedding from late 2022 was by raising the licensing threshold for embedded generation. But, even with this, inadequate electricity supply would remain a binding constraint on economic recovery in the near term.
The treasury predicts GDP growth will contract in the third quarter of 2021 because the manufacturing, retail and hospitality sectors were hard hit by the combined blows of a third Covid-19 wave and the“Despite this, GDP is now expected to return to pre-pandemic levels late in 2022 — earlier than projected in the February budget review,” the treasury said. “This is supported by the 7.5% gross domestic product growth in the first half of 2021.
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