GDP shows growth in 4th quarter of 2021, but still not quite recovered from Covid

Gross Domestic Product (GDP) was up for the fourth quarter of 2021 but is still lagging when compared to pre-pandemic levels.

GDP grew by 1,2%1 from October to December, taking the annual growth rate for 2021 to 4,9%.

However, according to Statistics SA, real GDP has not recovered to the level of the second quarter of last year before the civil unrest and stricter lockdown restrictions adversely affected the economy in the third quarter.

In addition, GDP is still lagging with economic activity on the same level as it was in the third quarter of 2017, with the economy 1,8% smaller than it was in the first quarter of 2020 before the pandemic hit.

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Drivers of growth in fourth quarter

Statistics SA says personal services, trade, manufacturing and agriculture were key drivers of growth in the fourth quarter.

This was helped by an increase in demand for goods and services that increased the expenditure side of the economy.

Exports and household expenditure were the most significant contributors to growth.

Personal services, including health-related activities, continued to see increased activity encouraged by the national vaccination programme, with hospitals also recording an increase in non-Covid-19 related patient admissions.

Trade activity increased by 2,9% as lockdown restrictions eased and had a positive effect on retail, the motor trade, tourist accommodation and restaurants, as well as fast-food and catering services, but economic activity in the wholesale sector was slightly lower.

The production of petroleum, chemical and plastic products and food and beverages primarily drove the 2,8% increase in manufacturing output, while all other manufacturing divisions had positive results as well, except metals and machinery and furniture and ‘other’ manufacturing.

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Agriculture also performed well in fourth quarter

According to Statistics SA, good rains boosted agriculture activity and with an increase in animal products, such as cattle, sheep, pigs and poultry and increased wheat production, the industry grew by 12,2%.

While the higher rainfall was good for agriculture, it did not benefit mining and mines produced less iron ore and coal in the fourth quarter due to heavy rains disrupting operations at opencast mines.

On the other hand, gold, manganese ore, diamonds and chromium ore mines also recorded lower production figures.

Growth in the finance industry was also lower by 0,8%, with the economic activity of financial intermediation (excluding insurance) and auxiliary activities declining.

It is also not surprising that growth in the electricity, gas and water supply industry decreased by 3,4%, with production curtailed by load shedding and infrastructure problems.

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Increased demand boosts GDP expenditure

South Africa’s exports increased by 8,5% in the fourth quarter and was mainly driven by precious metals and stones, such as gold, platinum and diamonds, base metals and motor vehicles, parts and accessories.

Imports also increased due to increased demand for machinery and equipment, motor vehicles, parts and accessories and base metals.

Statistics SA says consumer demand also recovered in the fourth quarter, with household expenditure increasing by 2,8%, reflecting the rise in trade activity on the production side of the economy.

The largest positive contributors to household expenditure were food and non-alcoholic beverages, restaurants and hotels and furnishings and household equipment.

However, inventories were a drag on expenditure in the fourth quarter as the trade and manufacturing industries had to use their stockpiles to meet demand, although there was an increase in supply.

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Top GDP performers in 2021

Mining, agriculture and manufacturing were the top performers in 2021 according to Statistics SA.

“After a dismal 2020, when the economy contracted by 6,4%, economic activity increased by 4,9% in 2021.

While mining, agriculture and manufacturing had the highest growth rates in 2021, finance, personal services and manufacturing were the largest positive contributors to overall growth.

The construction industry contracted again in 2021 by 1,9%, the fifth consecutive year of decline.