Impact of Covid-19 on the South African economy: A CGE, Holt-Winter and SARIMA model’s analysis

Abstract

Abstract. The spread of the coronavirus disease (COVID-19) emanating from China touched South Africa like other countries across the world. This study analyses the impact of the COVID-19 pandemic on South African economy and total revenue. For this purpose, we have made use of a single country’s Computable General Equilibrium (CGE) model, Holt-Winter (HW) and SARIMA models by formulating one scenario based on the likely duration of the pandemic. In the scenario, we assume that the pandemic will last six months. The results indicate significant impacts on the macroeconomic variables, employment and sectoral level and on households’ well-being. First, at the macroeconomic level, the COVID-19 crisis resulted in a significant drop in the economic growth rate across all the macroeconomic variables. The Gross Domestic Product (GDP), exports and private consumption dropped by 7.10%, 13.19% and 7.10%, respectively.  This represents a loss of real Gross Domestic Product of R338 billion. In contrast, the time series’ models project the state revenue to be around R1 104.5 trillion for Holt Winter model and R1 210 for SARIMA model, on average R1 157 trillion for the two models is expected. Furthermore, the models anticipate the loss in revenue at a region of R213.0 billion to a maximum of R318.2 billion from SARIMA and HW models, respectively for the same period. Moreover, the unemployment was expected to grow because of a sharp drop in sectoral productions. In addition, our findings reveal a contraction of sectoral exports. Finally, the rise of consumer prices and unemployment did greatly dampen the purchasing power of households.

Keywords. Coronavirus, Covid-19, CGE model, Holt Winter model, South Africa.

JEL. C68, C53.