In this edition of Business Day Spotlight, we’re reviewing the week’s top economics news, focusing on the latest GDP figures issued by national statistical service Stats SA.

Our host Mudiwa Gavaza is joined by Nicola Weimar, chief economist at Nedbank, to discuss the issues.

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Earlier this week Stats SA revealed that Covid-19 had caused a 51% decline in SA’s GDP in the second quarter of 2020.

Weimar says the results were worse than most had expected, with her team having forecast a 47.5% contraction. Everyone knew Covid-19 had hit the economy. The question until this week was how much the contraction would be. It was “slightly worse than expected”, she says.

Business Day Spotlight host Mudiwa Gavaza. Picture: DOROTHY KGOSI
Business Day Spotlight host Mudiwa Gavaza. Picture: DOROTHY KGOSI

Explaining Stats SA’s findings, Weimar says the economy shrank by 16% “if you compare it to the second quarter last year”. The 51% on the other hand related to “how much the economy shrank in the second quarter, if you compare it to the first quarter of this year and you annualise the rate — in other words, you assume the rate by which it shrank over that one quarter is maintained for the next four quarters”.

Outside these figures, she says, the bigger picture to consider is where the economy stood at the end of the first two quarters, or the first half of the year. How much smaller was SA’s economy in the first half of 2020 compared to the same period in 2019? That contraction sits at 8.7%, says Weimar. Together with the third quarter, this usually gives an indication of what the full-year figures will be. The fourth quarter may not have as material an effect for the year’s GDP but it does provide the base on which 2021 will start, she says.

Weimar also talks about what these latest figures mean for SA’s perception by international ratings agencies — Moody’s Investors Service, Fitch Ratings and Standard & Poor’s, which all have SA rated at “junk”.

She also gives her thoughts on public and state finances, the effect of load-shedding on SA’s pace of recovery, an outlook for the economy and how other African countries in the region have fared, given different lockdown levels.

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 Business Day Spotlight is a MultimediaLIVE production.

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