Mon, 06 Jul 2020

South Africa's economy decreased by 2.0% in the first quarter of 2020, Statistics South Africa reported on Tuesday morning.

This extends the technical recession that the country found itself in in the last quarter of 2019.

The release of Stats SA's latest quarterly GDP figures comes a week after Minister of Finance Tito Mboweni tabled his supplementary budget in response to the Covid-19 pandemic. Treasury now expects SA's GDP to contract by a record 7.2% in this year, while tax revenues are projected to fall R300 billion short of the what was estimated in February budget.

Globally, the economic outlook is also looking gloomy, with the United Kingdom reporting a 2.2% contraction between January and March of this year - the largest contraction for that economy in 40 years.

"The electricity, gas and water industry contracted by 5.6% in the first quarter, largely due to decreases in electricity distributed and water consumption. The construction industry decreased by 4.7%. Decreases were reported for residential buildings, non-residential buildings and construction works," said Stats SA in its report on the GDP figures released on Tuesday.

While load shedding played a significant role in the contraction of the economy in the fourth quarter of 2019, Covid-19 emerged as the likely culprit for extending the economy's contraction into the first quarter of 2020.

But the full impact of Covid-19 on SA's economy is expected to only show up in GDP data for the second and third quarters of the year.

South African economy shrank by 1.4% in the fourth quarter of 2019, plunging the country into the second technical recession of the Ramaphosa presidency.

That 1.4% fall followed a contraction of 0.8% in the third quarter of 2019, which means that the economy was in recession for the last half of 2019.

For the whole of 2019, the South African economy grew by only 0.2% (in real terms). In 2018, it saw growth of 0.8%.

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