SA economy rebounding from 2020 recession

Posted On Friday, 28 May 2021 11:36 Published by
Rate this item
(0 votes)

The South African economy continues to rebound from the 2020 recession, albeit at different growth rates across sectors, the South African Reserve Bank’s Financial Stability Review (FSR) has revealed.

Lesetja_Kganyago

On Thursday, the SARB released the first edition of the FSR for 2021. The FSR is the primary means through which the central bank communicates its assessment of financial stability risks and mitigating policy actions to the public.

The document, however, noted that the economic outlook remains “highly uncertain” and would depend on the pace of the COVID-19 vaccine roll-out.

“In line with improving economic activity, asset prices are recovering, and banks' loan default rates appear to be stabilising,” the Reserve Bank said in a statement.

The report noted that the country’s financial institutions remain “well capitalised”.

“Profitability across both the banking and insurance sectors has been materially lower, but remained positive in 2020, which played an important role in bolstering capital levels.

“Owing to ongoing profitability and reduced dividend payouts, the regulatory capital ratios for both the banking and insurance sectors remained at roughly the same levels at the end of 2020, as they were before the onset of COVID-19.”

In view of the fact that the banking sector seems well placed to withstand near-term challenges, the central bank said that the Prudential Authority (PA) relaxed its guidance on the payment of dividends by banks and proposed returning bank capital requirements to their pre-COVID-19 level by next year.

The PA had previously announced a reduction in bank capital requirements and had advised that banks refrain from paying dividends during the early stages of the COVID-19 economic shock to ensure that banks retain sufficient capital buffers to continue lending.

“The Loan Guarantee Scheme, which was implemented in response to COVID-19, has been extended to July 2021 and several other extraordinary policy measures remain in place. Among these measures, the most widely used has been the allowance for banks to restructure credit agreements for borrowers who have been affected by the COVID-19 pandemic, without the need to hold additional capital against those loans,” the SARB said.

Despite the improving outlook, the bank said there are still “material risks to financial stability”.

“These risks relate to the durability of the economic recovery, the potential for global financial conditions to shift abruptly, as well as to the high and rising level of public debt in South Africa. The latter risk is discussed at length in the FSR." 

The ability of South Africa’s financial sector to cope with a once-in-a-century recession and severe operational disruptions during 2020 reflected a “high degree of resilience”, the bank said.

“This resilience is expected to remain an important mitigant against potential future risks.”

Last modified on Tuesday, 01 June 2021 11:42

Most Popular

Strong demand boosts Balwin as it claws back three months of no construction activity due to covid lockdowns

May 18, 2021
The Huntsman 2
JSE listed Balwin Properties, a developer that cares about environmentally responsible…

Construction kicks-off at the R500-million Boardwalk Mall

May 17, 2021
Architects presective of the exterior  of the Boardwalk Mall
Flanagan & Gerard Group and Emfuleni Resorts, a subsidiary of Sun International (JSE:…

Growthpoint leverages development prowess to re-imagine La Lucia Mall as a vibrant suburban mixed-use experience

May 17, 2021
Growthpoint_Kent_La_Lucia_Residential_Apartments
Growthpoint Properties (JSE: GRT) is applying its development expertise to unlock…

Successful degearing and continued dividend payments has allowed Investec Property Fund to continue rewarding shareholders

May 19, 2021
Andrew_Wooler_IPF (1)
Investec Property Fund, (“IPF”, or “the Fund”) today announced a resilient set of…

Residential sectional title sales again on the rise

May 27, 2021
Andrew_Golding_Golding_PropertyGroup
Over the past 15 years, the sectional title market in South Africa has become entrenched…

Please publish modules in offcanvas position.