Third-quarter GDP growth only the start of a long road to recovery – economists

Professor Jannie Rossouw, interim head of the Wits Business School, says we must remember that GDP fell by 51% in the second quarter, which means the economy must grow again by the same amount to cancel out this fall. “The third quarter only covered two thirds.”

However, we could be a bit optimistic, he said.

“It looks as if the economy is starting to recover. Almost all the sectors showed an increase and I am very happy to see signs of growth, but we will only know for sure after the fourth quarter.”

Elna Moolman, head of SA macroeconomic, fixed income and currency research at Standard Bank South Africa, also said the stronger-than-expected GDP momentum in the third quarter was encouraging, although this was merely the beginning of a multi-year recovery to pre-pandemic levels of GDP.

She also pointed out that employment typically lagged GDP and it was likely to take even longer to recover the jobs lost during this crisis.

READ MORE: SA’s GDP grows by 13.5% in third quarter of 2020

“So far, the data available for the fourth quarter is encouragingly resilient and point to an on-going recovery. There are only a few indicators that have relapsed slightly, which we will monitor very closely.”

According to Moolman, Standard Bank expected the economy to contract by around 7.5% this year, but, as it was December already, the focus was really on the sustainable momentum in 2021 rather than these backward-looking numbers.

“We foresee 4.5% economic growth in 2021, which is very strong relative to SA’s recent growth trajectory. However, this is merely the initial phase of reverting to 2019 GDP levels, as GDP will probably only revert to pre-pandemic levels by the end of 2022 at the earliest.”

Moolman said the traction with implementing growth reforms now would have a critical bearing on the subsequent growth and in turn the speed with which we could address poverty.

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