The impact of COVID-19 on South Africa’s moribund economy were today laid bare, with data from Statistics South showing that the economy plunged 51% in the three months to June.
Second quarter’s gross domestic product (GDP) was the steepest economic contraction on record reflecting the severity of the impact of the country’s strict lockdown in response to COVID-19.
The construction sector led the decline in economic output – contracting 76.6%, followed by manufacturing which plunged 74.9% and mining which shrunk 73.1%. the positive spark in second quarter’s GDP print was agriculture, forestry and fishing which increased 15.1% , which benefited from higher maize exports, as well as rising international demand for citrus fruits and pecan nuts.
The stats agency said year-on-year, the economy shrank 17.1%, following a revised 0.1% growth in the previous period and compared with market expectations of a 16.5% decline.
Maarten Ackerman, Chief Economist and Advisory Partner at Citadel, said the economic decline is more attributable to the action taken to close down the biggest part of the economy rather than a result of economic factors.
“South Africa already printed two quarters of negative economic growth in the second half of 2019, and this declining trend unfortunately carried on into the first quarter of 2020. In fact, the year-on-year figure revealing a 17.1% decline in GDP over the 12 months to the end of June 2020 is perhaps even more telling than the quarterly figure,” Ackerman said.
Geoff Nölting, FNB Economist, said he anticipates more upbeat growth prospects in the second half of the year due to the gradual easing of restrictions on economic activity.
“Overall, we still affirm our view that economic growth will decline by 8% year-on-year in 2020. While we are encouraged by the infrastructure drive as part of the broader post-Covid-19 economic recovery plan, this remains an upside risk to our longer-term growth outlook,” Nölting said.