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South Africa’s economy contracted 7% during 2020.
- South Africa’s economy contracted 7% in 2020, according to data published by Stats SA.
- Fourth quarter GDP increased 1.5% on a non-annualized quarter-on-quarter basis, growth driven by the easing of lockdown restrictions.
- Economists generally expect growth to rebound in 2021, supported by the launch of Covid-19 vaccines.
South Africa’s economy contracted 7% during 2020, as expected given the unprecedented impact of the Covid-19 pandemic on economies around the world.
Statistics South Africa (Stats SA) released GDP results for the fourth quarter of 2020 and the full year on Tuesday.
“According to the latest preliminary indicators, real GDP decreased 7.0% in 2020 after an increase of 0.2% in 2019,” Stats SA said.
The fourth quarter registered 6.3% quarter-on-quarter growth, annualized seasonally adjusted. The size of the economy grew 1.5% on a non-annualized basis. The consensus expectation was that the economy would grow 5.6% qoq on a seasonally adjusted annualized basis.
In the third quarter, GDP increased 66.1% on a quarterly seasonally adjusted annualized basis, and Stats SA revised it to 67.3%. This does not mean that the economy grew by two-thirds, but rather that this is what GDP would be for the entire year if the economy expanded at the rates reported in the third quarter.
Essentially, during the third quarter the size of the economy contracted 6% compared to the previous year. GDP had plummeted to record levels in the second quarter when the strict lockdown was implemented, and the restrictions were so severe that economic activity was limited to what were considered essential services.
Economists expected growth in the fourth quarter to be slightly subdued compared to the previous quarter. The easing of lockdown restrictions helped fuel fourth-quarter growth, Stats SA said. The three economic sectors, primary, secondary and tertiary, grew during the quarter.
“Eight industries posted positive growth between the third and fourth quarters of 2020. The largest positive contributors to GDP growth in the fourth quarter were the manufacturing, trade and transportation industries,” the Stats SA report reads. In other words, the mining and financial industries decreased by 1.4% and 0.2%, respectively. In contrast, the manufacturing industry grew by 21.1%, trade increased by 9.8%, and transportation and its related industries increased by 6.7%.
The spending component of growth also saw overall increases for household consumption (an increase of 7.5%), government consumption (an increase of 1.1%) and gross fixed capital formation (an increase of 12.1%).
Economists did not expect the introduction of the adjusted level 3 lockdown to influence the fourth quarter data; They see the effects of alcohol prohibition and other restrictions trickle down to Q1 2021 results.
The recent move towards lockdown level 1 is also not expected to change growth prospects for 2021. Economists, Treasury and the South African Reserve Bank expect a strong GDP recovery in 2021 with estimated figures between 2.5% and 5%. But it could take a few years for economic performance to return to 2019 levels, before the Covid-19 pandemic struck.
The third and fourth waves of the Covid-19 pandemic are expected this year, and much of the recovery depends on the pace and scale of the vaccine launch.
[Thread]South Africa #economy grew by 1.5% in the fourth quarter of 2020, yielding an annualized growth rate of 6.3%.#StatsSA #GDP pic.twitter.com/LlTz2Nnssu
– Statistics SA (@StatsSA) March 9, 2021
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