The coronavirus (COVID-19) pandemic has once again exposed structural weaknesses in the economy and its failure to adequately transform beyond the diamond-based development model, prominent consultancy, Econsult, has said.
In a report on the fourth quarter of the year, researchers at Econsult said the country’s development model remained structured around public spending, domestically-focused services and subsidised state-owned entities.
"Once the macroeconomic driver of this model (diamonds) is disrupted, large macroeconomic imbalances in the fiscal accounts and the balance of payments – emerge very quickly," reads the report.
Econsult expects that the local economy contracted by around eight percent in 2020, worse than the 7.7 percent contraction seen in 2009 during the global recession.
Researchers said there had been a sharp contraction in the mining sector, with knock-on effects on the balance of payments and the government budget.
“Similarly, tourism has been devastated, and perhaps of more concern, seems likely to take much longer to recover than the diamond sector,” the fourth-quarter report reads.
“Although much smaller than diamonds in terms of its share of GDP, tourism employs many more people and encompasses a wide range of activities such as transport, accommodation, and many support services. “It probably has more direct linkages to
The Econsult researchers suggest that government extend support packages for the tourism sector in addition to the wage subsidy scheme, which was extended to tourism enterprises if the sector is to survive what is potentially another year of lost business.
Some other sectors including bars and restaurants, entertainment, brewing, and parts of retail similarly meanwhile, have no end in sight for their COVID-related agony.
Government’s key development priorities to address COVID-19 strife have been laid out in the Mid-Term Review of NDP 11 and the associated Economic Recovery and Transformation Plan (ERTP). These priorities include export-led growth, improving the efficiency of government spending, investing in infrastructure, human capital development and improving economic resilience. Government has said policy initiatives will need to focus on these priorities to achieve the necessary economic transformation.
"The urgency of structural change is now more apparent than ever,” Econsult researchers stated. “This will not necessarily be easy, and some tough – and painful – decisions and actions will be needed.”