Slow crawl out of the trenches
2021 is shaping up to be another lackluster year for the local economy. Hopes of achieving herd immunity have been dashed by delayed vaccine procurement, and the lack of vaccines has meant more caution in relaxing restrictions, keeping segments of the population locked down and public transport at half capacity. Although global economic prospects have improved markedly with the roll-out of several vaccines, the outlook for domestic demand is still a grim one, characterized by a slow crawl out of last year’s recession, uneven recovery across sectors and income groups, high joblessness and low investment appetites, and productivity losses. Our 5.5% GDP growth forecast for the year is below the government’s target (6.5%-7.5%) and much less upbeat than the projections of private analysts and multilateral agencies. The approaching election season introduces many risks that are expected to lead to sub-optimal economic policy choices, especially in the area of economic regulation.
The rest of the report discusses inflation risks and monetary policy response, fiscal risks and the calls for more stimulus, the high external balances, and a first look at prospective presidential candidates in 2022.
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