Real Economy Bulletin - First Quarter 2020

Main Bulletin: The Real Economy Bulletin - First Quarter 2020

In this edition

Trends in GDP growth: The first quarter of 2020 saw South Africa enter a third straight quarter of economic decline. But 2020 began a qualitative shift in the national and global economy. In the second half of 2019, the downturn was driven largely by the continued stagnation in commodity prices. From January to March 2020, however, the economy was increasingly weighed down by the impact of the COVID-19 pandemic. As a result, the South African economy is expected to shrink by around 7% in the coming year, while the global economy will fall by 5%, and by 6% if China is excluded. Read more.

International trade: South African exports in January and February showed signs of a recovery compared to the previous year, but they began to fall in March as the effects of the pandemic widened. Read more.

Employment: Although the year to the first quarter of 2020 saw some jobs growth, employment fell sharply during the lockdown, and has recovered only slowly since then. In the year to March 2020, employment climbed by 90 000 jobs. But the available data suggest that over a third of all formal private-sector employees were unable to work in April, during Level 5 of the lockdown. Depressed international and domestic demand mean that the reopening of the economy will not restore all of those jobs. Read more.

Investment and profitability: Investment and profitability data are only available through the end of 2019. The available indicators point to a liquidity crisis across business as incomes fell to near zero in April and demand has only come back slowly as the lockdown has eased, while many companies face substantial start-up costs. Read more.

Foreign direct investment projects: The TIPS FDI Tracker tracks foreign direct investment projects on a quarterly basis, using published information. Twenty-four projects were recorded this quarter with an investment value of about R40.7 billion. Read more.

Briefing note: Coronavirus – The impact of Covid-19 is likely to exacerbate pre-existing inequalities: The lockdown regulations in response to the COVID-19 health crisis have disrupted economic activity, the organisation of work, and communities. COVID-19 has presented itself as a health crisis, burying itself in a host of pre-existing inequalities and has manifested as an economic crisis in South Africa. This briefing note aims to consider the impact of the lockdown regulations on different groups in society from a gender perspective. Read the briefing note online: Coronavirus – The impact of Covid-19 is likely to exacerbate pre-existing inequalities.

Briefing note: Coronavirus – South Africa’s banking system response to SMMEs: With the economic impact of COVID-19 likely to be worse than the 2008 financial crisis, the risk to the economy is a significant reduction in credit and less financial liquidity. The impact would be that small businesses in particular would struggle with cash flow in addition to the myriad of other problems in the post COVID-19 economy, including a drop in consumer credit, constrained demand, and disruptions of supply chains. Have there been lessons learned from a recent financial crisis, and a resultant shift in the approach taken during this economic crisis by the South African banking system? Read the briefing note online: Coronavirus – South Africa’s banking system response to SMMEs.