South Africa GDP tanked as much as 53% in Q2: economists

Economists predict that South Africa’s economy is likely to grow strongly in the third quarter of 2020, after the coronavirus pandemic caused a major contraction in Q2 2020.

A poll conducted by Reuters shows that economists expect an annualised 44.5% contraction in the April-June quarter (Q2), compared with the median estimate in a July poll for a 38.7% fall.

The most pessimistic forecast was for a 53% contraction while even the most optimistic predicted a 20% fall.

Growth is seen recovering in the third quarter, although the forecast 18.6% rebound is not as sharp as the 19.3% predicted last month.

Despite cuts of 300 basis points since the start of the year, the severity of South Africa’s economic state means that the South African Reserve Bank (SARB) is unlikely to hike interest rates.

The economists believe that the SARB will keep interest rates at the current level of 3.50% for much longer than previously thought.

The median of the latest survey suggests no change though 2021 whereas the previous poll pointed to a 25 basis point hike in January or March.

South Africa already entered into a recession ahead of its coronavirus lockdown, following consecutive negative quarters at the end of 2020.

The country recorded a decline in Gross Domestic Product (GDP) in the first quarter of 2020, deepening the recession it entered into at the start of the year.

According to Stats SA, GDP growth for 1Q20 was recorded at -2%, marking the third quarter of decline in succession, following drops of 0.6% in 3Q19, and 1.4% in 4Q19.

Notably, the data reflects only the first three months of 2020, before the nationwide lockdown was fully implemented (27 March).

Banks, economists and government have all warned that South Africa will experience an unprecedented decline in GDP in 2020 as a result of the lockdown, with current projections ranging between a 5% and 10% down.

Prospects were already bleak prior to lockdown, with the most optimistic scenario pointing to GDP growth of just 1% in 2020.

Read: South Africa has another big problem – people aren’t paying for municipal services

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South Africa GDP tanked as much as 53% in Q2: economists