Opportunity to benefit from a sharp price rise in event of recovery

CAPE TOWN – The International Monetary Fund (IMF) last week awakened investors to just how deep the Great Lockdown recession is going to be: $9trillion (R169trillion) is expected to be wiped off the world’s economies, with global gross domestic product (GDP) expected to register -3percent.

The outlook for South Africa is worse. It was already in a recession when it went into lockdown on March 26, and the IMF predicted -5.8percent GDP growth this year.

Moody’s rating agency, however, predicts -2.5percent growth compared with its previous forecast of growth of 0.4percent.

Factors hurting the economy, apart from the impact on company earnings of a 35-day lockdown, include low commodity prices, capital outflows from emerging economies, while the weaker economies of our biggest trading partners means local exports will shrink.

China’s GDP, for instance, declined by an unprecedented 6.8percent in the first quarter, while US jobless claims surged by another 5.2million last week, bringing the jobless claims to more than 22million in the four weeks of lockdowns in that country.