Gross Domestic Product (GDP) statistics for the second quarter of 2020 announced by statistician-general Risenga Maluleke on Tuesday indicate an economy in severe distress as a result of the Covid-19 pandemic and the accompanying economic and social lockdown.
This is according to Professor Philippe Burger, Pro-Vice-Chancellor: Poverty, Inequality and Economic Development at the University of the Free State (UFS).
StatsSA revealed the country’s economy suffered a significant contraction during April, May and June when South Africa was under stringent lockdown restrictions due to Covid-19.
GDP decreased by 51% quarter-on-quarter and on a seasonally adjusted and annualised basis, in the second quarter of 2020, noted StatsSA.
Burger said virtually all sectors, except agriculture and government, contracted.
“However, there should also be a word of caution before we go off the rails, and it relates to how we understand the 51%. The economy in Q2 is not half its size in Q1,” he explained.
“The 51% is an annualised rate, i.e. we take Q2 shrinkage and ask, ‘If the whole year looks like this, with how much will the economy shrink?’ Output in Q2 was 16.4% smaller than in Q1. That is bad as it is, but the whole year will not look like Q2 – there will presumably be a rebound as we speak, in Q3 and Q4,” he noted.
Burger is hopeful the full year shrinkage will come in under 10%. “On a year-on-year basis, GDP in 2020Q2 is 17.2% smaller than in 2019Q2. But hopefully 2020Q4, on a year-on-year basis, will also come in under 10%.”
He added: “We, therefore, have a big recovery problem. We need to nevertheless keep a sense of perspective: we did not wipe out half the economy.”
The country’s economic policy and business planning now needs to focus on rebuilding businesses and balance sheets, preserving and restoring broken supply chains, and containing the job losses that have result from the shock experienced in the second quarter.