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Friday, December 18, 2020/ 03:00PM / United Capital Research /
Header Image Credit: Bramdspur
In the last month,
vaccine-related positivity across the globe spilled into the continent, raising
hopes that economic recovery in SSA economies could be faster than first
thought. However, this optimism has come under threat in recent days as
Covid-19 caseloads in major economies like Nigeria and South Africa (SA)
garners pace.
As restrictions were
lifted, which supported restoring economic activities in phases, South Africa's
economy showed some improvement. For example, the rand has appreciated 15.9% against
the dollar so far in H2 -2020 after a downturn in H1-2020. South African bond
yields have rebounded after an initial sell-off at the start of the pandemic
while the Johannesburg Stock exchange (JSE) has performed well, returning 12.6%
so far in H2-2020 alone, after it dipped -4.8% in H1-2020. A similar story can
be said in Nigeria which saw its economy contract at a slower pace in Q3 2020
with notable improvements across major sectors as the economy gradually
reopened.
However, with caseloads
surging, the South African government has introduced widespread restrictions to
combat the rising caseloads while fears of a new nationwide lockdown remains
prominent in Nigeria where new cases are now at record levels. The hope of a
vaccine to help contain infections and restore health remains dampened given
the fiscal inability of many SSA governments. Various studies have shown about
70% of the total population would have to be vaccinated for full economic
activity to return. In other economies, funding for vaccines remains uncertain
with poorer SSA countries expected to rely on donations. Factoring the rising
second wave and weak funding capacity for vaccines, we think SSA recovery may
be more prolonged than recent optimism suggests.
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