More gloom as South Africa’s GDP declines for 3rd consecutive quarter

Image credit: Twitter/SA Gov News

South Africa’s economy has contracted for a third consecutive quarter following a 2% decline in the first quarter of 2020, Statistics SA announced on Tuesday.

The economy declined by 1.4% and 0.8% in the third and fourth quarters of 2019 respectively. The latest results cover the period between 1 January and 31 March, which includes the beginning of the COVID-19 lockdown that started on 27 March.

Mining and manufacturing were the biggest contributors to the decline in the first quarter, Statistician-General Risenga Maluleke said.

Mining activity fell by 21.5%, the biggest fall in six years. Manufacturing also declined by 8.5%, its third consecutive quarter of decline. Electricity, gas and water supply industry fell by 5.6%.

Construction, trade fall

There was no respite for the construction industry which registered its seventh consecutive quarter of contraction, this time by 4.7%.

Economic activity in the trade industry (food and beverages, wholesale, motor trade and accommodation, with the exception of retail) fell by 1.2%.

On the positive side, agriculture, forestry and fishing industry increased by 27.8%. Five industries recorded growths, including personal services and transport and communications (0.5%), and government activity (1.0%).

“Finance, real estate and business services increased by 3,7% in the first quarter. Increased economic activity was reported for financial intermediation, insurance and pension funding, auxiliary activities, and other business services,” Maluleke said.

Stats SA also recorded a 2.3% decline in the expenditure side of GDP, which means the demand in the economy grew weaker in the first quarter. Measures included are household spending, government spending, investment spending and net exports.

GDP to contract by 7.2% in 2020

The latest statistics follow government projections that the economy will contract by 7.2% this year as the full impact of the COVID-19 pandemic and lockdown kicks in.

This is despite a R500 billion economic and social response package President Cyril Ramaphosa announced in April. The package includes tax relief measures as well as a R200 billion loan guarantee scheme for businesses in distress.

The government has also rolled out a temporary employer/employee relief scheme (TERS) administered through the Unemployment Insurance Fund (UIF).

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