South Africa remained in recession at the start of the year, with a first-quarter fall in GDP of 2% on an annualised basis. With the nationwide lockdown at its strictest in the second quarter, PMI data signalled that the downturn is set to deepen sharply in the three months to June. Business closures and a steep drop in client demand reportedly led to severe reductions in activity, according to the survey. Lockdown measures were eased in June, but with cases mounting and some measures reimposed in July, the economic outlook for the private sector remains challenging.
Recession continues in 2020 amid first-quarter drop in GDP
South Africa recorded its third successive quarterly contraction in GDP at the start of 2020, posting an annualised 2% fall in the three months to March. This translated into a 0.1% annual fall in GDP, broadly consistent with that signalled by the South Africa PMI.
On a sector basis, the largest negative contributors to GDP were mining & quarrying and manufacturing, which contracted 22% and 9%, respectively. Combined, they lowered first-quarter GDP by approximately 2.8%, outweighing an overall expansion in the remaining sectors of the economy.
A likely driver of the decline was the emergence of coronavirus disease 2019 (COVID-19) in China and Southeast Asia during January and February, with lockdown measures notably hampering global trade within the region. In March, key European trading partners also went into lockdown, further constraining foreign demand. Combined with ongoing electricity supply issues in South Africa, these were clear depressors on GDP at the start of the year.
Downturn expected to intensify sharply in second quarter
Even more concerning for economic growth is that South Africa implemented their own nationwide lockdown at the end of March, just days before the close of the first quarter and continuing throughout the second
