Little in GDP data to be upbeat about, says economist

GDP drops 2% in the first quarter, #eNCA's Devan Murugan spoke to Investec Chief Economist Annabel Bishop about. #eNCA Courtesy #DStv403


PRETORIA - Tuesday's data on South Africa's GDP beat analysts' expectations for a contraction of 3.8 percent in the first quarter.

The country's recession deepened in the first quarter of 2020, with the gross domestic product (GDP) contracting 2 percent from the previous three months, led by declines in mining and manufacturing.

"While this was nowhere near as bad as the market had feared, there is little in the data to be upbeat about," said Razia Khan, chief economist for Africa and the Middle East at Standard Chartered.

READ: SA economy contracts 2% in Q1 as recession deepens

"The year/year decline was modest, with the return of growth in agriculture providing some support. But the read-across to other sectors, and the expenditure breakdown of GDP, provides plenty of reason to be concerned."

Statistics South Africa said mining contracted by 21.5 percent in January-March, while manufacturing was down 8.5 percent.

Compared to the same period a year ago, GDP shrank 0.1 percent in the first quarter after a 0.5 percent decline in Q4 2019.

READ: South Africa enters recession​​​​​​​

A strict nationwide lockdown from late March has been partially eased to allow key sectors like mining, manufacturing and retail to resume operations, but the outlook remains gloomy.

"Tentative green shoots of consumer recovery will have been completely overridden by the COVID crisis, and rise in joblessness since then," Khan said.

"When an economy's starting point -- even prior to the COVID lockdown -- is an unemployment rate that is over 30 percent, it is difficult to imagine what further deterioration looks like."