South Africa GDP (Q3) - Capital Economics
Africa Economics

South Africa GDP (Q3)

Africa Data Response
Written by Virag Forizs

The stronger-than-expected rebound in South Africa’s GDP in Q3 is overshadowed by more recent data pointing to a stuttering recovery. And concerns about a second wave of COVID-19 as well as harsh fiscal austerity plans pose growing headwinds to the economy.

Headwinds on the horizon following decent Q3 recovery

  • The stronger-than-expected rebound in South Africa’s GDP in Q3 is overshadowed by more recent data pointing to a stuttering recovery. And concerns about a second wave of COVID-19 as well as harsh fiscal austerity plans pose growing headwinds to the economy.
  • As measured by the production approach, South Africa’s GDP expanded by 13.5% q/q in Q3, equivalent to a 66.1% q/q expansion at a seasonally-adjusted annualised rate (saar) following a 51.0% q/q saar contraction in Q2. (See Chart 1.) The outturn was stronger than our own forecast for GDP to grow by 46.0% q/q saar (10.0% q/q) as well as the Bloomberg consensus of a 54.4% q/q saar (11.5% q/q) rise in output.
  • The production breakdown showed a solid recovery in the sectors hardest hit by stringent lockdown measures in Q2. (See Table 1.) The mining and manufacturing sectors posted triple digit growth rates in q/q saar terms in Q3; output in the former grew by 40.4% q/q and by 32.7% q/q in the latter. The retail sector also mounted a decent recovery; output rose by 24.1% q/q. Economic activity was probably spurred by the gradual easing of containment measures, allowing production to resume.
  • On the expenditure side, household consumption and exports both rebounded strongly while imports remained subdued in Q3. A more competitive rand may have given South African exports an edge. Inventories were a drag on growth last quarter.
  • More recent figures suggest that the rebound in economic activity has slowed. Both the whole-economy PMI and the manufacturing PMI dropped back in November. And there are growing headwinds facing the economy. The threat of a renewed tightening of containment measures on the back of rising daily new COVID-19 cases could weigh on activity. The roll-out of vaccines in South Africa is unlikely to start before mid-2021. Harsh austerity and scarring effects from the crisis will also dampen domestic demand.
  • The result is that we expect South Africa to endure one of the slowest recoveries in the emerging world over the coming years – GDP is still likely to be around 2.5% below its pre-virus trend by end-2022.

Chart : South Africa GDP

Source: Stats SA

Table 1: South Africa GDP

GDP

Agriculture

Mining

Manufacturing

Construction

Trade, Catering

% q/q saar

% y/y (SA)

% q/q saar

% q/q saar

% q/q saar

% q/q saar

% q/q saar

Q4 2019

-1.4

-0.5

-7.6

1.8

-1.8

-5.9

-3.8

Q1 2020

-1.8

0.1

28.6

-21.5

-8.5

-4.7

-0.7

Q2 2020

-51.7

-17.5

19.6

-72.0

-74.9

-76.5

-67.6

Q3 2020

+66.1

-6.1

18.5

+288.3

+210.2

+71.1

+137.0

Source: Stats SA


Virág Fórizs, Africa Economist, virag.forizs@capitaleconomics.com