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The SA Daily 09 September 2020

GDP growth slump way worse

Shireen Darmalingam

  • SA’s Q2:20 GDP outcome was worse than expected, contracting by 51.0% q/q (saar), the steepest slide since 1990. This comes after the contraction of 1.8% q/q (saar) in Q1:20. GDP growth fell by 17.1% y/y in Q2:20 when the pandemic had virtually halted the SA economy. The resultant fallout now puts SA into its longest recession in 28 years.
  • The biggest negative contributions came from the manufacturing (-74.9%), trade (-67.4%) and transport (-67.9%) industries. The only sector to report growth in Q2:20 was the agriculture, forestry and fishing industry.
  • While Q3:20 holds more promise, a recovery will depend largely on reforms, stable electricity supply, and the stabilisation of the Covid-19 pandemic which will depend on an effective vaccine. The disappointing GDP outcome does not sway our 2020 outlook; we still forecast growth to contract by 8.5% this year, then to recover by posting 4.5% growth in 2021.
  • Global growth, too, will contract sharply this year. The IMF recently revised its outlook lower for the global economy to -4.9% in 2020, from -3.0%. Such a recovery too is expected to be slower than previously anticipated; growth is forecast at 5.4% in 2021, from a previous estimate of 5.8%. However, even these forecasts are nevertheless contingent on the duration of the pandemic, with the IMF noting downside risks to estimates.
  • Advanced and emerging economies will inevitably see their GDP growth fall this year, with the IMF noting the “Great Lockdown” recession as likely to be the steepest in almost a century.

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