Positive GDP growth so far does not reflect impact of July’s looting
THE ECONOMY’S fourth consecutive quarter of growth may be positive, but uncertainty still abounds about the impact of the Covid-19 pandemic and disruptive violence and looting in July, economists said yesterday. GDP figures released by Statistician-General Rhulani Maluleke yesterday indicated the economy recorded its fourth consecutive quarter of growth, expanding by 1.2 percent in the second quarter of this year, discounting the July disruptions, which marked a major milestone since the onset of the pandemic at level 3 of the Covid-19 pandemic.
Economists said despite the gains made over the last four quarters, the economy is 1.4 percent smaller than what it was before the Covid-19 pandemic, implying that the impact of the wave of severe business disruption, protest action and violence in KwaZulu-Natal and Gauteng which took place in July will reflect in the third quarter GDP results due for release in December. In the first quarter last year, real GDP was R1 147 billion, tumbling to R947bn in the following quarter as the country barricaded itself against the pandemic.
“Unfortunately, GDP growth is not quite where it should be in order to make a dent in our unemployment numbers. The nominal growth is not fantastic when you consider the low base we’ve been coming off in prior quarters,” said Garth Rossiter, Lulalend’s chief risk officer.
He added that the lockdown had a big impact on most small and medium enterprises, in particular those selling alcohol and restaurants which have been hardest hit by these ongoing changes.
Analysts said the economy has seen consistent growth since that shock, but not enough to return to pre-Covid-19 levels with real GDP at R1 131bn in the second quarter of 2021, 1.4 percent down from the reading in the first quarter of 2020.
Six of the 10 industries recorded a rise in production in the second quarter of 2021, most evident in the transport, communication, personal services and trade industries that were the most significant drivers of growth in the second quarter.
The seasonally adjusted quarter-on-quarter expansion follows a 1 percent increase in GDP recorded in the first three months of 2021, according to data published by StatsSA yesterday.
Unadjusted real GDP for the first six months of 2021 increased by 7.5 percent from the same period a year ago.
“President (Cyril) Ramaphosa has
Economists suggested that to see real GDP growth and to drive the economy forward, government needs to focus on creating an enabling environment for these SMEs, which involves keeping the lights on, driving the vaccination programme, investing in infrastructure and providing policy certainty.
FNB senior economist Thanda Sithole said that compared to pre-pandemic fourth quarter 2019 levels, robust performance in the agricultural sector’s activity has persisted, assisted by favourable demand and weather. Other sectors have also crawled out of a pandemic-induced slump and their respective activities were gravitating towards the pre-pandemic levels. “The construction sector is still lagging behind in the recovery, which is reflected by the stagnant growth in gross fixed capital formation,” Sithole said.