The SA economy is 11% bigger than previously thought, according to Stats SA, which on Wednesday announced a rebased figure for GDP, a regular exercise that should be done every five years.
However, growth rates and patterns before and after the revision are similar, showing little change in real growth of the economy, which has been stagnant. Both the revised and previous series show the severe impact of Covid-19 in 2020, with the economy shrinking 6.4%, though that was revised from a decline of 7%.
Reserve Bank deputy governor Kuben Naidoo said that while the economy had proved more resilient than anticipated, with the central bank at one point looking at a 12% contraction, the extent of the shock should not be underestimated.
“It’s still an absolutely massive downturn,” he said at a webinar organised by asset manager Ninety One. “There’s been significant damage to the economy and it will take many years to recover.”
GDP is measured in several ways: as the value of all goods and services in a country; the value of all expenditure; or the value of all incomes. The rebasing exercise is done to capture changes in the economy over time as new sectors come to the fore and others decline.
The change brings both good and bad economic news, though in general the trends will be the same. SA’s debt-to-GDP ratio — a key relationship watched by investors and credit ratings agencies — will fall, based on a larger GDP number. And the SA population will look slightly less poor, as measured by GDP per capita. The ratio of fixed capital investment to GDP, another key indicator of economic health, will decline.
Investec chief economist Annabel Bishop said that the new GDP figures lowered gross debt to 71.1% for 2020/2021 from the previous 80.3% of GDP; with 2021/2022 estimates revised to 73.5% from the earlier forecast of 81.9% of GDP; and 2023/2024 to 78.4% (87.3%).
The revisions lower the budget deficit ratio to -12.4% of GDP from 14% for 2020/2021, -8.4% of GDP (February estimate -9.3%) for 2021/2022, and for 2022/2023 to -6.6% of GDP (previous estimate -7.3%), assuming no additional expenditure, she said.
“This will be pleasing to the ratings agencies, but still shows rising debt as opposed to stabilisation,” she said.
In terms of the rebasing, the key finding on the production side of the measurement was that the finance, real estate and business services industry — which is the largest sector of the economy — was found to be larger than previously estimated. Household consumption expenditure was found to be larger, due mainly to methodological changes. The household expenditure components of recreation and culture, and restaurants and hotels recorded the biggest upward revisions.
However, even after the rebasing, SA is still third in size on the continent after the power houses of Egypt and Nigeria. This is according to World Bank data, which ranks countries in terms of purchasing power parity.
The new base year for GDP measurement is 2015, a change from 2010. The rebasing and benchmarking exercise is two years overdue, as the five-year cycle was interrupted due to the extent of the revisions and the disruptions caused by the Covid-19 pandemic, Stats SA said.
Update: August 25 2021
This article has been updated with additional information.
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