The Real Economy Bulletin - Fourth Quarter 2020

Main Bulletin: The Real Economy Bulletin - Fourth Quarter 2020

In this edition

Gross domestic product: As forecast since the middle of 2020, the South African GDP in 2020 was 7% lower than in 2019. After the very sharp downturn during the lockdown in the second quarter, most of the real economy has largely recovered on the back of higher metals prices and more targeted measures to prevent COVID-19 from spreading. Still, economic growth was affected by the continued risk of contagion, which suppressed recovery particularly for in-door hospitality and entertainment. The factors that slowed growth before the COVID-19 pandemic also remain a challenge, although government has announced measures to address unnecessary red tape and infrastructure shortfalls more consistently through its Operation Vulindlela. Read more.

Employment: As usual with downturns, but on an unusually devastating scale, the recovery in jobs lagged the resurgence in the GDP. Total employment grew by 330 000 or 2.2% in the fourth quarter of 2020. But employment remained 1.4 million below 2019 levels because the economy shed some 2.2 million jobs in the second quarter. The decline over 2020 was greatest for lower-level workers in general and informal workers in particular, aggravating South Africa’s already sharp income inequalities. Read more.

International trade: The trade balance remained strong in the fourth quarter, largely because exports benefited from higher mining prices and auto exports. Manufactured imports also rebounded sharply. Read more.

Investment: Private investment flattened out in the fourth quarter of 2020 while public investment showed strong growth. The investment rate (investment as a percentage of the GDP) improved marginally from 15.1% of the GDP in the third quarter to 15.4% in the fourth quarter – still far below pre-pandemic levels. Returns on assets improved for mining and manufacturing in the third quarter, but fell for construction. Read more.

Foreign direct investment projects: The TIPS FDI Tracker tracks foreign direct investment projects on a quarterly basis, using published information.The total investment value from projects captured this quarter was R68.9 billion. Projects captured in the fourth quarter are a mix of those announced at the 2020 Investment Conference and others identified outside the conference. Read more

Briefing note: South Africa's emerging recovery strategy: From the day the lockdown started, government has contended that South Africa cannot simply go back to pre-pandemic days, when growth was already slow and inequality persistently high. Instead of a narrow recovery, then, it called for reconstruction, addressing the structural constraints on inclusive growth. There is, however, a huge gap in how different groups define and prioritise the structural constraints to growth. Read the briefing note online: South Africa's emerging recovery strategy.