The extent to which Covid-19 shutdowns pummelled SA’s already ailing economy is in focus in the week ahead, with second-quarter GDP figures expected to show that the economy as much as halved when compared with the first three months of the year.
The Bloomberg consensus is for a GDP contraction of 49% quarter on quarter, but analysts say early signs are that there was a recovery in the third. Year on year, GDP is expected to fall 16.5% in the three months to end-June, according to the 11 economists surveyed by Friday.
All indications are that the second-quarter GDP print on Tuesday will be unprecedented for all the wrong reasons, said NKC African Economics head of Africa macro Jacques Nel.
“The agricultural sector will effectively be the source of economic growth, with both industry and services showing a broad-based reduction in output during the quarter,” said Nel, who expects a 50% quarter-on-quarter decline.
Things are expected to improve in the third quarter, said Nel, but given that consumers remained cautious and load-shedding had resumed, this improvement may be a relative one.
Absa economists have noted encouraging signs for the third quarter, including that tax collections showed improvement across different categories in July.
“While this is obviously a welcome development, employment is of course a lagging indicator and firms may still need to downsize or close in the future,” the Absa economists said in a note.
While there should be a third-quarter improvement, SA’s GDP is still expected to decline about 10.1% in 2020, according to Investec chief economist Annabel Bishop.
“The pace of recovery will be extremely slow for the SA economy, in particular held back by the major electricity constraints and lack of political will to radically reduce the complexity and number of regulations the industrial sector is constrained by,” Bishop said.
The FNB/BER consumer confidence index on Monday is expected to show an improvement in the third quarter from the second, when it reached a low not seen since former president PW Botha’s 1985 Rubicon speech.
On Thursday, mining and manufacturing data for July is also expected to show the positive effects of easing lockdown conditions, but remain negative on a year-on-year basis. Mining output fell 28.2% year on year in June, and manufacturing 16.3%.
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