SOUTH Africa’s economy will have to ramp-up activity in order to achieve the growth forecast of 4.2 percent in 2021 as Covid-19 continued to impact growth.
Data from Statistics South Africa (StatsSA) yesterday revealed that the economy failed to expand at a quicker pace in the first three months of this year.
Headline gross domestic product (GDP) grew 1.1 percent in the first quarter of 2021, translating into an annualised growth rate 4.6 percent.
StatsSA said key sectors of finance, mining and trade expanded and were the main drivers of output on the production side of the economy.
However, agriculture, forestry and fishing contracted on weaker production in field crops and animal products due to load shedding and a decline in the supply of water.
Though the GDP print was above market expectations, it fell lower than the revised annualised 5.8 percent rise recorded in the fourth quarter of 2020.
Statistician-General Risenga Maluleke said the Covid-19 pandemic and subsequent lockdown restrictions caused significant disruptions to the economy.
Maluleke said despite the third consecutive quarter of positive growth, the economy was 2.7 percent smaller than it was in the first quarter of 2020.
“Economic activity has increased since then, in line with easing lockdown restrictions, with real GDP rising to R761 billion in the first quarter of 2021,” he said.
“We are almost back to the level we were in the first quarter of 2016 as the economy is 2.7 percent down from the R782bn recorded in the first quarter of 2020.”
The economy was pushed into a deep contraction of 7.2 percent in 2020 due to the Covid-19 pandemic and its associated lockdown restrictions.
PPS Investments portfolio manager Reza Hendrickse said the economy had some way to go to restore what had been lost as current levels of activity were still only back to 2016 levels.
“This calls for one to perhaps critically assess prospects going forward, particularly given the cyclical tailwinds from forces external to South Africa,” Hendrickse said.
This GDP reading comes just a week after the country’s unemployment rate rose to a record 32.6 percent, which will put additional pressure on consumer spending.
However, StatsSA said household final consumption expenditure rose by 4.7 percent in the first quarter driven largely by clothing, footwear and furniture while spending at restaurants and hotels declined.
Citadel’s chief economist Maarten Ackerman said these numbers might be promising but the economy had somewhat flat-lined three years prior to Covid-19.
Ackerman said if the steady growth continued, the country might reach pre-Covid levels by the end of the year.
“South Africa needs to grow at a rate of over 2.5 percent to thrive,” Ackerman said.
The country’s recovery has also been pegged to the successful roll-out of the Covid-19 vaccine programme, which appears to be floundering at the moment.
Investec’s Lara Hodes said over and above that, it was critical that the government increases the supply of electricity and water, and improves port activity substantially.
“Timeous roll-out of the Covid19 vaccination programme and other areas of flagging state infrastructure and systems remains imperative,” she said.