Cape Town – Finance Minister Enoch Godongwana has warned that the conflict in Ukraine could have an impact on the economy if it continues to drag on.
He said this came against the backdrop of a positive economic trajectory where the economy grew by 4.9% last year after it had shrunk by 6.4% the previous year due to Covid-19.
Godongwana, who was addressing Parliament during the adoption of the Budget, said the economy had been performing well in a number of sectors.
But the conflict in Ukraine could hit the country with soaring oil prices and further sanctions imposed on Russia.
Western powers have been demanding Russia to pull out of Ukraine and imposed the toughest sanctions.
“Honourable members, since then, there has been significant global developments that will have an impact on our economy – notably the conflict between Russia and Ukraine. This conflict carries with it significant risks for a world economy that is yet to fully recover from the shock of the Covid-19 pandemic. The longer the conflict lasts as well as the imposition of further sanctions could lead to widespread global inflation and impede global economic recovery,” said Godongwana.
“On the positive side, we expect that the rally in export commodity prices, stemming from supply concerns brought about by the conflict, will provide added support to the local mining sector and a possible windfall to revenue collections.
“However, the rising oil price, the potential weakening of the rand against the US dollar, and supply constraints around wheat, pose upside risks to food and headline inflation,” he said.
The conflict in Ukraine has been going on since last month with the US and other Western countries demanding the withdrawal of Russian forces in that country.
POLITICAL BUREAU
