South Africa’s GDP shrunk by 7% in 2020, mainly due to strict lockdown restrictions

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DGP growth for last year was dire and Covid-19 shutdowns affected economic activity. However, there was a sharp rebound in the fourth quarter of 2020. Picture: iStock
DGP growth for last year was dire and Covid-19 shutdowns affected economic activity. However, there was a sharp rebound in the fourth quarter of 2020. Picture: iStock

BUSINESS


South Africa’s economy contracted by 7% in 2020 reflecting the full impact of the Covid-19 pandemic and the strict lockdown. In the fourth quarter of 2020, however, it posted growth of 1.5%, giving an annualised growth rate of -6.3% said Stats SA on Tuesday.

Stats SA released its 2020 fourth quarter and full year GDP results. The agency stated that these results follow the revised 13.7% (annualised: 67.3%) rise in economic activity recorded in the third quarter.

Statistician-General Risenga Maluleke said the annual real GDP growth rate of -7.0% in 2020 was primarily led by decreases in manufacturing.

Statistician-General Risenga Maluleke. Picture: Morapedi Mashashe

“The economy slumped by 7% in 2020. The positive growth recorded in the third and fourth quarters was not enough to offset the devastating impact of Covid-19 in the second quarter when lockdown restrictions were at their most stringent.

“All industries fell except for agriculture and government but these were not enough to offset the 7% negative growth,” said Maluleke.

He added: “If we explore the historical data, this is the biggest annual fall in economic activity the country has seen since at least 1946.”

The statistician general said growth is slowly coming back to normal.

Read: Despite GDP rebound we must remain cautious – Debt Rescue

The GDP 4th quarter 2020 statistical release shows that eight of the ten industries made positive gains in the fourth quarter, most notably manufacturing. Manufacturing was bolstered by increased production in food, beverages and motor vehicles.

According to Stats SA, the manufacturing industry increased at a rate of 21.1% and contributed 2.4 percentage points to GDP growth. The trade, catering and accommodation industry increased at a rate of 9.8% and contributed 1.3 percentage points. The transport, storage and communication industry increased at a rate of 6.7% and contributed 0.5 of a percentage point.

However, mining and finance, real estate and business services recorded a decline in economic activity.

“The mining and quarrying industry decreased at a rate of 1.4%, contributing -0.1 of a percentage point to GDP growth.

“Decreased production was reported for platinum group metals, coal and diamonds,” reads the report.

Maluleke said “Agriculture flourished in 2020”.

“Despite the impact of the pandemic on economic growth, agriculture escaped the effects of the pandemic relatively unscathed, expanding production by 13.1% in 2020. Government also grew marginally in the year, up by 0.7%,” said Maluleke.

Read: GDP slumps 51% as Covid brings economy to a halt

Stats SA reports that all other industries were pummelled.

The construction industry, already in deep trouble before the pandemic, contracted by 20.3% marking the industry’s fourth consecutive year of economic decline.

A decline in air travel also contributed to the contraction in the transport and communication industry. Rail and road freight operators also found themselves hamstrung by restrictions placed on the production and movement of various goods during the second quarter, reads the report.

The GDP results were in line with market expectations.

According to Stats SA, the manufacturing industry increased at a rate of 21.1% and contributed 2.4 percentage points to GDP growth. The trade, catering and accommodation industry increased at a rate of 9.8% and contributed 1.3 percentage points

The Bureau for Economic Research (BER) said the GDP figures provide the complete picture for 2020.

“After the second quarter [GDP] collapse, we expected a sharp moderation in the fourth quarter.

“The figures also provide the first official estimate of the magnitude of the GDP decline due to the Covid-19 health crisis and the associated lockdown restrictions,” said BER researchers in a note.


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