Between sluggish growth and budgetary difficulties, the South African economy has been in crisis for several years. In 2020, the covid-19 pandemic escalated the situation, plunging the economy into a historic recession.
The South African economy contracted by 7% in 2020. This was announced by the South African Office of Statistics (Stats SA) in a report released on Tuesday, March 9, 2021. Unsurprisingly, the main cause of this historic drop in GDP is the covid-19 pandemic.
It has affected 1.5 million people nationwide with 50,803 deaths, making South Africa the worst-affected nation in Africa by the disease. However, it is mainly the effect of the strategy used against the virus that appears to have been worse than the disease, at least economically.
Indeed, from a quarterly point of view, the strongest economic contraction was recorded in South Africa in the second quarter of 2020. This was marked by the adoption of restrictive and containment measures, which certainly slowed down the economy.
spread of the virus, but also brought an abrupt halt to an economy that was already on a tight rope. Even if the lifting of these measures allowed a gradual recovery of the economy over the last two quarters (13.7% growth for the third and 1.5% for the fourth 2020), thanks in particular to an increase in activity in eight of the ten main key sectors of the economy, the resulting losses could not be recovered.
“The positive growth recorded in the third and fourth quarters was not enough to offset the devastating impact of covid-19 in the second quarter, when containment restrictions were most stringent. The economic activity for the whole year decreased by 7.0% in 2020 compared to 2019 ”, indicates Stats SA.
He added: “If we look at the historical data, this is the largest annual decline in economic activity the country has experienced since at least 1946”.
It should be noted, however, that agriculture is the only key sector of the South African economy to have genuinely resisted the crisis. Its growth was 13.1% in 2020. In the previous year, South Africa’s GDP grew only weakly by 0.2%. For 2021, the IMF expects an economic recovery of nearly 3% for the Rainbow Nation.
Source Ecofin Agency