South Africa’s economy starts 2021 on a positive note, but the looming third wave of Covid-19 infections present a downside risk to growth

SOUTH AFRICA - Report 08 Jun 2021 by Iraj Abedian

Real annualized quarterly GDP went up by 4.6% in the first quarter of 2021. This was following annualized expansions of 67.3% q/q and 4.6% q/q during the third and fourth quarter of 2020, respectively. Today’s GDP print confirms that South Africa’s economy is indeed recovering from its record slump in H1-2020, even though it is still to recover to pre-pandemic growth levels. Today’s GDP print shows that the second wave of Covid-19 infections that led to the country being placed at tighter (adjusted level 3) restrictions at the beginning of the year did not severely dampen South Africa’s economy.

It is worth mentioning that Statistics South Africa (Stats SA), contrary to what it had communicated and what we have previously reported (see our May 3rd report), is still reporting the annualized quarterly GDP as the headline metric, and has indicated that it will only start reporting the headline figure that is not annualized from August 2021. Nonetheless, it is highly unlikely that extreme annualized prints such as those recorded during the second and third quarter of 2020 would be recorded in the foreseeable future. In effect, these huge growth rates in some sectors are largely the base-effects enhanced by the soaring commodity prices in the mining sector.

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