South Africa out of recession as economy rebounds in Q3
* S/Africa GDP Far From Pre-Covid Levels Even as Recession Ends
* GDP expands 66.1% in Q3
South African Gross Domestic Product (GDP) expanded an annualized 66.1 percent in the three months through September recovered from the previous quarter following a 51.7 percent decline in the second quarter, Statistics South Africa said Tuesday.
The economic recovery by the continent’s second-biggest economy was more than projected and the first positive number after four consecutive periods of contraction.
However, compared with the same period last year, GDP shrank by 6 percent, the second straight quarter of decline. On a non-annualized basis, the economy expanded 13.5 percent from the previous quarter.
The rebound in the quarterly figure was expected as output resumed in Africa’s most-industrialized economy after most activity was shuttered because to a strict nationwide lockdown. The recovery remains at risk, with power shortages and slow structural reforms likely to weigh on sentiment.
What Bloomberg Economics Says
“The recovery is already losing momentum while a resurgence in Covid-19 may call for tighter containment measures. We expect only a modest recovery until vaccines become widely available.”
The median estimate of 14 economists in a Bloomberg survey was for a 54.4 percent increase in output. The rand gained as much as 0.8% to 15.0331 against the dollar, the strongest level since February.
Getting back to pre-Covid level could take at least five years and “this is only on the condition that we stick to reforms,” independent economist Thabi Leoka said by phone.
Unlike after the 2008-09 crisis when South Africa’s economy was propped up by strong global growth, the country can’t rely on a linear international rebound to lift its GDP, she said.
South Africa’s economy still contracted year-on-year in the third quarter
For the nine months through September, GDP contracted by 7.9 percent from last year. That’s the clearest indication of how much the economy could shrink for the full year and is in line with forecasts from the government and central bank.
A resurgence of the pandemic in South Africa is among the key downside risks to growth next year, according to Hugo Pienaar, chief economist at the Stellenbosch-based Bureau for Economic Research. The end of temporary Covid-19 support measures also means the economy will be much less robust in the fourth quarter and going into the first three months of 2021, he said.
Household spending, which makes up about 60 percent of GDP, increased by an annualized 69.5 percent from the second quarter. Investment as reflected by gross fixed capital formation, grew 26.5%.
Increased coronavirus cases globally has hit some of South Africa’s major trading partners and sources of tourism income, while a rise in infections at home could see some restrictions reimposed. That would make it more difficult to bring down the official unemployment rate that returned to a 17-year high in the third quarter, improve revenue collection and curb a wide budget deficit and surging government debt.