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South African economy contracts 7% in 2020 amid Covid-19 slump

South Africa’s GDP grew 6.3% in the last quarter of 2020, despite a second wave of Covid-19 and lockdown restrictions. 

Once again the country’s recovery has exceeded economists’ expectations, but the economy — which declined 7% in 2020 — is still reeling from the effects of Covid-19. This is slightly better than the treasury’s -7.2% prediction for 2020.

Forecasts put quarter-on-quarter GDP growth at between 4% and 5.5%. Nedbank economists predicted the economy would grow 3.9% in the fourth quarter and that overall it would contract 7.2% in 2020. The Bureau of Economic Research had a slightly more optimistic view, projecting 5.5% quarter-on-quarter growth at the end of 2020.

Kevin Lings, the chief economist at Stanlib, forecast 5.1% growth in the last quarter of 2020. “The 6.3% was above expectations. I think similar to the third quarter, growth exceeded expectations because almost every sector of the economy recorded improved growth,” Lings said on Tuesday.

In the third quarter of 2020, the economy’s quarter-on-quarter seasonally adjusted growth rate was 13.5%.

According to Statistics South Africa’s GDP numbers, eight industries recorded 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 transport industries.

The manufacturing industry increased at a rate of 21.1% in the fourth quarter, contributing 2.4 % points to the overall GDP growth. Nine of the 10 manufacturing divisions reported positive growth rates in this quarter.

The trade, catering and accommodation industry increased at a rate of 9.8% and the transport, storage and communication industry increased at a rate of 6.7%.

Lings noted that these industries recorded growth despite the second wave of Covid-19, which triggered stricter lockdown measures. 

Mining and finance both declined in the final quarter. The 1.4% decline in mining came after the industry grew by an impressive 271.2% in the third quarter of 2020. 

“But broadly it was good … The overall performance is better. But for the year as a whole it is still -7%, so it doesn’t change that. There was still a massive decline during last year,” Lings said.

“But I think the story is that in the second half of the year, we were clearly able to recover. We’ve still got a way to go to fully recover. But it does suggest that we have got a reasonable pick up that is probably better than what people anticipated in the middle of last year.”

In its budget document, the treasury forecast that GDP will grow by 3.3% in 2021. This growth will be supported by a mass Covid-19 vaccination programme, the treasury said.

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Sarah Smit
Sarah Smit
Sarah Smit is a general news reporter at the Mail & Guardian. She covers topics relating to labour, corruption and the law.

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