Simple statistical filters for estimating the output gap suggest that the output gap has shifted into positive territory as potential growth has slowed. This suggests excess capacity built up during the COVID-19 pandemic has reduced and inflationary pressures have been building since early 2021. SARB estimates, on the other hand, have implied some lingering disinflationary pressures from excess capacity, until quite recently.
The COVID pandemic has likely had a marked impact on potential growth. The statistical filters used above are useful for identifying changes in the trend of GDP, but they do not disentangle the demand and supply shocks associated with the pandemic or control for the likely under-utilisation of capital and labour during this period. Estimating the impact of the pandemic and ongoing loadshedding on potential growth requires the use of a structural model that can estimate the impact of these factors on the economy’s productive capacity.