Finance Minister Tito Mboweni says as a result of the COVID-19 pandemic, the country's economy is projected to contract by 7.2% in 2020.
Mboweni said this when he tabled the Supplementary Budget Review on Wednesday.
"This is the largest contraction in nearly 90 years. Inflation will likely register 3% in 2020, in line with the outcome of this morning.
"Commodity price increases and a weaker oil price have softened the blow, but as a small open economy reliant on exports, we have been hit hard by both the collapse in global demand and the restrictions to economic activity," he said.
The February budget forecast growth of 0.9% for 2020.
In its Supplementary Budget Review, National Treasury said the forecast proved optimistic, given the unexpected contraction in the fourth quarter of 2019, which emerged after the Budget was tabled in Parliament but before the onset of COVID-19.
"COVID‐19 has turned the global economy upside down. In the February Budget, we expected that the global economy would expand by 3.3% in 2020.
"We now expect a global contraction of 5.2% this year. This will bring about the broadest collapse in per capita incomes since 1870," Mboweni said.
The Minister's remarks come on the back of Stats SA's announcement that the country's unemployment rate had gone up to 30.1%.
"Throughout the world, tens of millions of workers have lost their jobs. South African unemployment increased by one percentage point, reaching 30.1% in the first three months of this year. This meant it was up from 29.1% in the final quarter of last year," Mboweni said.
National Treasury said, meanwhile, that high levels of uncertainty about the spread of Coronavirus, its containment and treatment, have complicated decision-making for businesses, investors and households the world over.
In addition, regular economic surveys have been disrupted and delayed, making policymakers more reliant on smaller, less representative surveys. As a result, estimating the economic impact over the period ahead is exceedingly difficult.
"While the scenarios outlined in this special adjustments budget are intended to illustrate potential policy outcomes, data and projections may change significantly in the months ahead," said Treasury.