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The Department of Statistics South Africa has released the latest Gross domestic product (GDP) report for the fourth quarter (October to December) of 2020, indicating that the local economy has dropped by 7%. This is the largest annual decrease in GDP since the end of World War II.
The local economy has dropped by 7%, heralding the largest annual decrease in GDP since the end of World War II
The report offers positive respite with indications that the economy grew by 1.5% in the fourth quarter due to manufacturing and trade.
In a press statement, Stats SA highlights where this economic growth can be attributed to.
“The economy grew by 1.5% in the fourth quarter, giving an annualised1 growth rate of 6.3%. This follows the revised 13.7% (annualised: 67.3%) rise in economic activity recorded in the third quarter. Eight of the ten industries made positive gains in the fourth quarter, most notably manufacturing (bolstered by increased production in food, beverages, and motor vehicles) and trade (driven by retail, motor trade, catering, and accommodation). Mining and finance, real estate and business services were the two industries that recorded a decline in economic activity.”
Although there was some positive economic growth notably, Stats SA has highlighted that the impact of the pandemic and the height of lockdown regulations ultimately contributed to the severe drop in GDP.
“If we explore the historical data, this is the biggest annual fall in economic activity the country has seen since at least 1946.2
To provide some perspective, the second biggest fall was recorded in 1992 when the economy contracted by 2.1%, as illustrated in the chart below. At that time, the country was struggling through a two-year-long recession, mainly the result of a global economic downturn. During the 2008/09 global financial crisis, the economy shrank by 1.5% in 2009.”
With inflation considered, the economy is currently at the same size that it was in 2021.
The impact on various sectors
The latest report found that the agricultural sector experienced high economic growth and reportedly expanded its expansion by 13.1% in 2020.
A range of other sectors have been economically devastated by the pandemic;
- The construction industry dropped by 20.3%
- GDP results for the second quarter3 in a decline in air travel contributed towards a contraction in the transport and communication industry
- An economic decline in rail and road freight operators
- Although the manufacturing sector experienced economic growth, the overall yearly growth declined by 11.6%.
The GDP release can be found here.
Featured image: GovernmentZA via flicker