SA’s GDP numbers come out better than expected, but still below pre-Covid levels

Stats SA released the country’s quarter two GDP figures, which came out better than expected – beating estimates, despite economic activity still below pre-Covid levels. The onset of the coronavirus pandemic and the ensuing lockdowns saw South Africa’s second largest economic contraction on record, with analysts stating that it may take the country till 2024 to get back to pre-Covid economic activity. The quarter three GDP figures will be telling, with the looting and vandalisation that took place in KZN and parts of Gauteng – the two largest contributing provinces – set to be a major headwind. The unemployment figures released a few weeks back also point towards an economy still under severe pressure. – Justin Rowe-Roberts

(Bloomberg) – South Africa’s recovery from a coronavirus-induced contraction quickened in the second quarter as restrictions to contain the pandemic were eased.

Gross domestic product expanded 1.2% in the three months through June from a revised 1% in the previous quarter, Statistics South Africa said Tuesday in the capital, Pretoria. The median estimate of four economists in a Bloomberg survey was for growth of 0.9%. The agency no longer reports an annualised growth rate and now uses 2015 as the base year for the data.

The economy grew 19.3% from a year earlier – the first year-on-year increase in five quarters. That’s up from a low base in the second quarter of 2020, when a strict Covid-19 lockdown shuttered most activity, and compares with the 17.8% median estimate of 14 economists in a separate Bloomberg survey.

While the quarterly outcome supports forecasts that predict Africa’s most industrialised economy will recover from its biggest contraction in at least 27 years, it’s likely to be revised after the statistics agency was forced to use an estimated value for missing mining data. That’s because the Department of Mineral Resources and Energy failed to provide it with timely information needed to calculate mining production and sales figures for June.

The economy is likely to contract in the third quarter after deadly riots, looting and arson erupted in July and weighed on activity in the eastern KwaZulu-Natal province and the commercial hub of Gauteng – the two biggest provinces by contribution to GDP. A cyber attack at the state-owned ports and rail operator also hobbled trade at key container terminals and led the company to declare its second force majeure in a month.

A fourth wave of Covid-19 infections that’s due in early December and could prompt stricter lockdown measures amid vaccine hesitancy, electricity-supply constraints and the slow pace of structural reforms could further weigh on output for the second half of the year. It could also hinder job creation in a nation where more than a third of the workforce is unemployed.

South Africa’s economy is stuck in its longest downward cycle since World War II as a policy paralysis and weak business sentiment weigh on fixed investment spending, with private-sector companies wary to commit large sums of money to domestic projects. Gross fixed capital formation rose 0.9% from the first quarter.

Growth in household spending, which now accounts for about 63% of GDP, increased 0.5% in the second quarter. Data released Monday showed consumer confidence remains depressed and that temporary welfare measures, retrenchment and life insurance payouts are among the factors propping up household finances.

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