SA GDP surprises on the upside in the third quarter, but the outlook warrants cautious optimism

SOUTH AFRICA - Report 08 Sep 2021 by Iraj Abedian

Statistics South Africa’s (StatsSA) recently rebased South Africa gross domestic product (GDP) has resulted in upward revisions of the country’s 2020 GDP (at current prices) by 11%, to R5.52 trillion (previously R4.97 trillion). This leaves the annual growth rate for 2020 at -6.4% from -7%. The updated base for GDP from 2010 to 2015 incorporates new activities in the economy, with the largest changes coming about in finance, real estate and business services (26% higher); general government services (45% lower); and personal services (206% higher).

From a fiscal policy perspective, this means that Gross Debt is now lowered to 71.1% for the 2020/21 year, from 80.3% of GDP. For the year 2021/22, the gross debt has changed to 73.5% of GDP from the 81.9% stated in February’s budget review. The rebasing, however, did little for SA’s international ranking with regard to GDP. According to the World Bank, the country now ranks as the 36th largest economy in the world, up from 37th place before the rebasing.

Despite the upward revisions to the GDP figures, there is need for some perspective: currently, the economy is still 1.4% smaller than before the pandemic, and economic activity has only reached 2017 levels. The key drivers of growth in 2Q2021, according to the statistics agency, were transport and communications (with a 6.9% q/q growth rate), mainly due to an increase in land transport and communication services, followed closely by agriculture (6.2% q/q growth), as production of field crops, horticulture and animal products increased. Lastly, personal services (2.5% q/q growth) were boosted by increase in community services, trade (2% q/q growth, as economic activity edged higher in wholesale, retail and motor trade) and mining (1.9% q/q growth, driven by increased production for platinum group metals ((PGMs)), gold and coal). The main concern, however, is that job-creating sectors such as construction and manufacturing saw declines of 1.4% and 0.8%, respectively. That, coupled with record high unemployment figures of 34.4% for 2Q2021, validates the caution.

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