No surprise as South Africa’s economy contracts by 51% in Q2 2020

SOUTH AFRICA - Report 08 Sep 2020 by Iraj Abedian

The 2Q GDP results had been expected to be the worst in decades because of the effect the Covid-19 pandemic has had on the country and the economy. The second quarter was the period during which strict lockdowns, some of the strictest globally, were implemented in the country, which of course greatly limited economic activity.

Indeed, the GDP metrics released by Statistics South Africa indicate that there was a deep contraction of the economy during the second quarter of 2020, with real GDP growth recording -51% q/q. This follows another real GDP decline of 1.8% q/q in the first quarter of 2020 (upwardly adjusted from -2% q/q). This means that South Africa’s economy contracted for four consecutive quarters, starting with the H2 2019 quarterly declines. The GDP recorded during the first six months of 2020 also represents a contraction of 8.7% from the corresponding period in 2019.

The only exception to the overall dismal GDP results is the agriculture, forestry and fishing sector. Out of the ten main sectors, only agriculture grew positively during the second quarter, increasing by 15.1% q/q,following an increase of 28.6% q/q in the first quarter of 2020. We have reported before that favorable weather conditions have been benefiting the sector, with a bumper maize crop especially boosting the sector during H1 2020. It is also interesting to note that the bulk of the upward revision of the first quarter real GDP figure came from agriculture as the sector’s Q1 2020 growth was revised from 27.8% q/q to 28.6% q/q.

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