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‘SA not out of the woods yet’ as economy grows by 4.9% in 2021

Statistician-General Risenga Maluleke said real GDP continued to lag pre-pandemic levels too, with economic activity on a par with the third quarter of 2017. Photo: Kopano Tlape/GCIS.

Statistician-General Risenga Maluleke said real GDP continued to lag pre-pandemic levels too, with economic activity on a par with the third quarter of 2017. Photo: Kopano Tlape/GCIS.

Published Mar 9, 2022

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THE ECONOMY could remain in a protracted recession despite data from Statistics South Africa (StatsSA) yesterday that showed that the economy expanded by 4.9 percent in 2021, recovering from a pandemic-induced 6.4 percent decline in 2020.

In spite of economic growth mounting a significant comeback last year and from a historic contraction experienced at the height of the Covid-19 pandemic in 2020, economists now fear that the next few months will likely be more volatile as the ongoing Russian invasion of Ukraine has led to a spike in oil prices, South Africa's largest import item.

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This was the largest growth in gross domestic product (GDP) in 14 years, led by higher economic activity in finance, personal services, and manufacturing industries.

Despite these positive figures, StatsSA said real GDP was yet to recover to the level recorded in the second quarter of 2021 before civil unrest and stricter lockdown restrictions shook the economy in the third quarter.

Statistician-General Risenga Maluleke said real GDP continued to lag pre-pandemic levels too, with economic activity on a par with the third quarter of 2017.

Maluleke said the economy was 1.8 percent smaller than it was in the first quarter of 2020.

“We are not yet out of the woods in terms of the Covid-19 impact,” Maluleke said.

“At the beginning of 2020 we were sitting at R1.47 trillion in terms of real GDP. We are now sitting at R1.126trln, so we have not even reached where we were pre-Covid. We are actually at the same level where we were in the third quarter of 2017.”

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On a quarterly basis, StatsSA said that the GDP advanced by 1.2 percent in the three months to December following an upwardly revised 1.7 percent contraction in the third quarter.

StatsSA said the fourth quarter was upbeat as half the sectors in the economy, especially mining and agriculture, made positive contributions.

Agriculture recorded the largest growth at 12.2 percent helped by higher than usual rainfall.

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AgriSA chief economist Kulani Siweya, however, said the sector's performance belied the challenges that threaten to derail its continued success.

“The most important of these challenges is the state of South Africa's critical infrastructure, especially roads, freight and our failing ports,” Siweya said. “This is a critical challenge South Africa must address in order to consolidate the gains of the past quarter and accelerate economic recovery.”

StatsSA said the increase in demand in the fourth quarter of 2021 drove up the expenditure side of the economy, with exports and household expenditure the most significant contributors to growth.

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The construction industry, however, contracted for the fifth consecutive year in 2021, falling by 1.9 percent.

The Don Consultancy Group chief economist Chifi Mhango said the economy's diminishing share of value contribution by traditional key sectors such as the mining, construction and manufacturing was a cause for concern.

“To reverse this worrying sectoral GDP trend, there is need to continuously improve the consumption of locally produced goods, increase the level of investment into the key sectors,” Mhango said.

As a result of volatile market conditions, growth forecasts for 2022 now varied between 1.7 to 2.1 percent, still the 4 to 5 percent required to create the needed jobs.

FNB senior economist Thanda Sithole said geopolitical tension and domestic factors such as the resurgence of load shedding were posing a downward risk to this year's GDP forecasts.

“We are concerned about the near-term economic impact of the ongoing Russia-Ukraine conflict, tightening financial conditions and the unresolved domestic power supply disruptions,” Sithole said.

“As such, we have subsequently trimmed our 2022 growth forecast by 0.5 percentage points to 1.7 percent, with risk skewed to the downside if the elevated oil prices persist longer than we currently assume.”

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