South Africa’s economy contracted by 7% last year

Stats SA has published the latest gross domestic product (GDP) data for South Africa for the fourth quarter of 2020, showing growth over the period broadly in-line with expectations.

South Africa’s real GDP growth for the fourth quarter was up 1.5% on a seasonally-adjusted basis. Year-on-year, there was a decline of 4.1%, Stats SA said.

On a seasonally-adjusted, annualised basis, growth was recorded at 6.3%, which was higher than predicted by economists and analysts, who projected Q4 growth between 5% and 5.5%.

For 2020 as a whole, projections of an annual contraction in GDP of 7% were on the mark.

 

No more annualisation

Following confusion caused by the annualisation of GDP data in 2020 – caused by the Covid-19 pandemic and lockdown disruptions to the economy, Stats SA said it would no longer use the annualised data as the headline GDP statistic.

During periods of steady economic growth, annualising is a useful way of expressing quarter-on-quarter performance in annual terms, Stats SA said. However, during periods of economic instability, annualising can be misleading, because it exaggerates growth rates that are unlikely to be repeated.

“For example, largely as a result of the Covid-19 pandemic and lockdown regulations, real GDP contracted sharply in the second quarter of 2020 and rebounded strongly in the third quarter,” it said.

In future, Stats SA will publish the quarter-on-quarter real GDP growth rate (seasonally adjusted) as the headline rate – ie, the headline rate will no longer be the annualised rate.

“This is the practice in many countries. Supplementary growth rates, namely year-on-year growth for individual quarters and for year-to-date, will continue to be published,” it said.

Sector performance

The manufacturing industry increased at a rate of 21.1% in the fourth quarter, contributing 2.4 percentage points to GDP growth.

Nine of the 10 manufacturing divisions reported positive growth rates in the fourth quarter. The four divisions with the largest contributions to the increase were:

  • Food and beverages;
  • Motor vehicles, parts and accessories and other transport equipment;
  • Basic iron and steel, non-ferrous metal products, metal products and machinery; and
  • Wood and wood products, paper, publishing and printing.

The trade, catering and accommodation industry increased at a rate of 9.8%, contributing 1.3 percentage points to GDP growth. Increased economic activity was reported for retail trade, motor trade, catering and accommodation.

The transport, storage and communication industry increased at a rate of 6.7%, contributing 0.5 of a percentage point to GDP growth. Increased economic activity was reported for land and air transport and communication services.

The construction industry increased at a rate of 11.2% in the fourth quarter. Increased production was reported for residential buildings, non-residential buildings and construction works.

The personal services industry increased at a rate of 4.8% in the fourth quarter; increased economic activities were reported for community and other producers.

The agriculture, forestry and fishing industry improved at a rate of 5.9% in the fourth quarter, mainly due to increased production of animal products.

Industries in 2020

Looking at 2020 overall, the annual real GDP decline of 7.0% was primarily led by decreases in manufacturing, which contributed -1.4 percentage points based on growth of -11.6%.

Trade, catering and accommodation contributed -1.3 percentage points based on growth of -9.1%; and transport, storage and communication, contributed -1.3 percentage points based on growth of -14.8%.

The agriculture, forestry and fishing industry increased by 13.1% in 2020, and general government increased by 0.7% in 2020.


Read: A year of lockdown: South Africa will count the costs this week

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South Africa’s economy contracted by 7% last year