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Better-than-expected economic growth driven by finance and mining

South Africa’s economy grew 1.1% in the first quarter of 2021, translating into an annualised GDP growth rate of 4.6%. The first-quarter growth marks the third consecutive quarterly increase in real GDP.

According to Statistics South Africa (Stats SA), the real GDP in the first quarter of 2021 is roughly comparable to what it was during the same period in 2016. It is 2.7% lower than it was in the first quarter of 2020, before Covid-19 took its toll on South Africa’s economy.

The Stats SA data shows that growth was driven by the finance and mining sectors, which together contributed 2.7 percentage points to GDP growth. Finance is the largest industry in South Africa.

The finance industry increased 7.4% and contributed 1.5 percentage points to GDP growth; the mining industry grew by 18.1% and contributed 1.2 percentage points to GDP growth.

Trade was the third biggest contributor to growth, increasing 6.2% and adding 0.8 percentage points to the GDP. 

Finance and mining have lower employment shares relative to their GDP contribution, whereas trade, construction and agriculture have higher employment shares relative to their GDP contribution.

The reported GDP growth surprised on the upside. Nedbank forecast GDP to grow by an annualised rate of 3.2% year on year. Others were slightly more optimistic, with the Bureau for Economic Research expecting 3.8% growth.

Last month the South African Reserve Bank revised its growth outlook to 4.2% in 2021, up from 3.8%.

“The stronger growth forecast for 2021 reflects better sectoral growth performances and more robust terms of trade in the first quarter of this year,” the reserve bank’s monetary policy committee said in its May statement

“Despite rising oil prices and a higher total import bill, commodity prices have risen to new highs, strengthening income gains to the economy.”

Stats SA has decided that the quarter-on-quarter GDP growth rate will no longer be annualised.

“During periods of steady economic growth, annualising is a useful way of expressing quarter-on-quarter performance in annual terms,” Stats SA noted in its GDP data release.

“During periods of economic instability, annualising can be misleading, because it exaggerates growth rates that are unlikely to be repeated.”

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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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