New report of attack on Strait of Hormuz shipping fans fears of threats to oil supplies
GDP increased at seasonally adjusted and annualised rate of 6.3% QoQ in 4Q20, largely as a result of the further easing of COVID-19 lockdown restrictions. Therefore, on an annual basis, real GDP decreased by 7.0% YoY in 2020 following an increase of 0.2% YoY in 2019. This was better than the previous forecast, the South African Reserve Bank (SARB) had expected a contraction of 7.1% YoY, while National Treasury had forecast a decline of 7.2% YoY and the IMF a notably worse contraction of 7.5% YoY. Importantly, eight industries recorded positive growth between 3Q20 and 4Q20 - a welcome indicator that the rebound in economic growth is broad-based.
The largest positive contributors to 4Q20 GDP growth were the manufacturing, trade, and transport industries. The manufacturing industry increased at a rate of 21.1% and contributed 2.4 percentage points to 4Q20 GDP growth. The trade, catering and accommodation industry rose by a rate of 9.8% and contributed 1.3 percentage points. The transport, storage and communication industry advanced at a rate of 6.7% and contributed 0.5 of a percentage point.
Whilst better than previously forecast, it is important to bear in mind that the 7% YoY decline in economic activity is also the biggest decline since 1920 when output dropped by 11.9% during the two-year, post-World War I recession. Furthermore, South Africa’s economy was in recession before COVID-19 and thus the pandemic has simply exacerbated already present structural weakness. Whilst the latest COVID-19 restrictions have since eased, the risk of a resurgence in infections and the reimposition of tighter restrictions remain, especially as South Africa continues to lag wealthier developed nations in launching its immunisation campaign.
