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Statistics South Africa (StatsSA) will release the results of South Africa’s Gross Domestic Product (GDP) for the second quarter of 2020 on Tuesday (September 7), providing a clearer picture of the severity of the economic impact of Covid-19.
Data for the three months through June 2020, the period in which the country was under a harsh lockdown, imposed by the government to prevent the spread of the coronavirus, is expected to show that the country entered a much deeper recession.
The return of cargo reduction is also expected to affect the country’s productivity levels during the period.
A survey conducted by Reuters shows that economists expect an annualized contraction of 44.5% in the April-June (Q2) quarter, compared to the median estimate from a July survey of a 38.7% drop.
“The biggest threat to the ZAR in the long term is the state of South Africa’s fiscal situation. It’s unsustainable, ”analysts at ETM Analytics said in a note.
“The GDP figure could well be the worst impression in a century and provide information on a budget deficit that is likely to increase to around R700 billion or more.”
South Africa recorded a decrease of Gross Domestic Product (GDP) in the first quarter of 2020, deepening the recession that it entered at the beginning of the year.
According to Stats SA, GDP growth for 1Q20 was recorded at -2%, marking the third quarter of decline in succession, after declines of 0.6% in 3Q19 and 1.4% in 4Q19.
Meanwhile, Bloomberg reported that South Africa’s economy likely contracted by 40.1% annualized in the second quarter, according to the Reserve Bank’s forecast.
Nedbank said in a recent note that concerns about the fiscal situation, allegations of corruption and weak growth prospects will continue to weigh negatively on investor sentiment, reduce the attractiveness of the country’s assets and potentially undermine foreign capital inflows. .
And while growth is forecast to pick up in the third quarter, South African consumer confidence remained at a nearly three-decade low in the three months through June, First National Bank said in a statement emailed to Bloomberg on Thursday. Monday.
The government began a gradual and phased reopening of the economy on May 1 and moved to so-called level 2 in mid-August, allowing most business and domestic travel to resume.
However, many companies permanently closed or laid off workers during the shutdown, and the unemployment rate likely rose to 35% in the second quarter, according to the median of estimates from eight economists in a Bloomberg survey.
The easing of restrictions and the resumption of economic activity “have finally allowed the majority of consumers to go back to work and earn a living,” said Mamello Matikinca-Ngwenya, chief economist at FNB.
“Unfortunately, there is a significant risk that overall household finances will recover less or take longer to recover than consumers currently anticipate,” Matikinca-Ngwenya said.
“Not only will the Covid-19 social grant supplements and the new social distress relief grant expire in October, but job losses are projected to further increase over the next six months.”
Read: South Africa is running out of options, warns bank
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