Displaying items by tag: GDP growth

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.

Published in Quarterly Bulletin

Main Bulletin: The Real Economy Bulletin - Second Quarter 2019  

In this edition

GDP growth: Statistics South Africa reported rapid growth in the GDP in the second quarter, at 0.8% in actual terms – that is, 3% at an annualised rate. The data continue the increased volatility in the GDP data over the past five years. The data also again raise questions about the seasonal adjustment of the quarterly GDP data. Read more

Employment: After a sharp fall in the first quarter, employment in the real economy was essentially stable in the year to the second quarter of 2019. It is now at the same level it was in 2015. Read more

International trade: Both imports and exports increased between the first and second quarters. Only marginal growth was observed compared to the same period last year. Read more.

Investment and profitability: Investment fell almost 2% in year-on-year terms through the second quarter of 2019, although it showed a sharp recovery in the past quarter. The decline was due entirely to a fall in public sector investment over the year, with gains in the second quarter of 2019 reflecting a steep improvement in private business investment. Read more.  

Foreign direct investment projects: The TIPS FDI Tracker tracks foreign direct investment projects, analysing new and updated projects quarterly. Based on media monitoring, it added 17 projects this quarter – the bulk of which came to completion – while one project was updated. Read more

Briefing note: Seasonality in the GDP data: According to official Statistics South Africa GDP data, even after adjusting the data to remove seasonal variations, the economy contracted in the first quarter of 2019 in five of the six years from 2014 to 2019. In contrast, the economy reportedly shrank just twice in the second quarter, once in the third quarter, and not at all in the fourth. These data point to an extraordinary shift in the GDP data, with the emergence of an annual cycle in the seasonally adjusted quarterly figures.Read the briefing note online: Seasonality in the GDP data

Briefing note: Industry Master Plan methodology: The relaunch of industrial policy from early 2019 included proposals for Master Plans for priority industries.This briefing note draws on experience with the development of Master Plans for various sectors as well as the experience of sector strategies in the auto industry to propose a standard methodology for the process. Read the briefing note online: Industry Master Plan methodology. For a more detailed discussion of this topic see TIPS Policy Brief Master Plans for industrial policy.

Briefing note: Brexit and South African trade: The current disarray in British politics centres on the nature of Brexit, with no consensus in sight either on how it should be achieved, or on the UK’s future relationship with the EU. The new Prime Minister has faced strong resistance to a no-deal exit, but it is not clear what proposals could achieve a majority in Parliament, much less support from most British citizens. Because the UK is still one of South Africa’s major trading partners, the final outcome will have significant implications for our own economyRead the briefing note online: Brexit and South African trade.

Briefing note: FDI that supports development priorities – Measuring the “quality” of foreign direct investment: The intensified drive to increase investment raises the question of “quality” of FDI into South Africa. That in turn points to the importance of developing tools or mechanisms to assess FDI, with the aim of maximising its benefits towards achieving inclusive industrialisation. It is important to understand the extent to which projects contribute to South Africa’s development priorities – at a granular level, essentially being able to measure their value-add against developmental priorities. Read the briefing note online: FDI that supports development priorities.

Published in Quarterly Bulletin

Main Bulletin: The Real Economy Bulletin - First Quarter 2019  

In this edition

GDP growth: The GDP declined in the first quarter of 2019, while the economy lost jobs. The downturn continues the trend of volatile growth rates that began five years ago. Previous quarterly downturns in this period, however, were driven by agriculture; in contrast, the past quarter saw a broad-based decline. The briefing note on the economic slowdown explores factors behind these trends. Read more.

Employment: Employment in the real economy fell by 160 000 jobs in the year to the first quarter of 2019. It is now at the same level it was in 2015. Manufacturing and construction accounted for the bulk of the net loss in jobs. In the rest of the economy, community and social services lost more than 200 000 jobs while other sectors gained employment. Overall, employment as a whole lost jobs for only the second time since 2010. Read more

International trade: In constant rand terms, South African exports have barely grown since 2013. In US dollars, they climbed from 2016 to mid-2018, but fell more than 10% in the six months to March 2019. Nonetheless, an even faster decline in imports – due in part to slow growth and in part to fairly low petroleum prices – meant that the balance of payments remained positive, although a deficit emerged in the first quarter of 2019. Read more.

Investment and profitability: The 2% fall in investment from the year to the first quarter 2018 to the year to the first quarter 2019 was a central factor behind the economic downturn. The sharpest decline emerged for public investment, although both state-owned enterprises and government departments reported a recovery in the first quarter of 2019 alone. Private investment, in contrast, grew slightly year on year, but contracted sharply from the fourth quarter of 2018 to the first quarter of 2019. Read more.  

Foreign direct investment projects: The TIPS FDI Tracker tracks foreign direct investment projects, analysing new and updated projects quarterly. Based on media monitoring, it added 14 new projects in the past quarter. Ten of these were in manufacturing, and five were greenfield projects. Six projects previously captured in the Tracker have been updated, with two reaching completion. Read more

Briefing note: The economic slowdown: The first quarter of 2019 saw a convergence of poor economic data. The GDP fell by 0.8%; investment, by 1.1%; and exports by 2%. Employment dropped by 1.4%, or 240 000 jobs. Seasonal job losses are not uncommon in the first quarter, but from 2010 to 2018 they averaged just 0.1%, so 2019 saw a significantly larger fall. Read the briefing note online: The economic slowdown.

Briefing note: African Continental Free Trade Area (AfCFTA) - Supporting inclusive growth and transformation: The African Continental Free Trade Area (AfCFTA) requires 22 countries to ratify its adoption and submit proof/deposit the instruments of ratification with the African Union (AU) for it to come into effect. On 29 April that happened, and on 30 May 2019 the free trade agreement came into effect. Read the briefing note online: African Continental Free Trade Area (AfCFTA): Supporting inclusive growth and transformation.

Published in Quarterly Bulletin

Main Bulletin: The Real Economy Bulletin - Fourth Quarter 2018

In this edition

GDP growth: South Africa’s GDP grew by an estimated 0.3% in the fourth quarter of 2018, after expanding 0.6% in the third quarter. For the year, the GDP grew 0.8%. Manufacturing and agriculture continue to grow, but construction and mining struggled. Read more.

Employment: The economy as a whole generated 360 000 jobs in the year to the fourth quarter of 2018, mostly in the informal sector and domestic work. Employment in manufacturing, mining and agriculture remained essentially flat, while construction reportedly created 90 000 mostly informal jobs over the year. Read more.

International trade: South Africa’s balance of trade strengthened in the fourth quarter, mainly due to a fall in imports while exports increased. The economy typically runs surpluses during periods of slow growth, as seen in the past three years. Read more

Investment and profitability: The decline in public investment, which has contributed to slower GDP growth since 2015, continued in 2018. In contrast, private investment picked up somewhat, although it remained below levels achieved before the commodity boom ended in 2012. Read more

Foreign direct investment projects: Eighteen new projects were added to the TIPS Foreign Direct Investment (FDI) Tracker in the past quarter. Some of these projects were announced during the Investment Conference held in October 2018 while others date back before it. Read more

Briefing note: The 2019 budget and industrialisation: The 2019 Budget faced tough choices. In the end, National Treasury prioritised core social services, infrastructure, and rescuing Eskom while avoiding an excessive increase in the national debt. The trade-off is a squeeze on industrial policy programmes, which will see cuts in real terms. Read the briefing note online: The 2019 budget and industrialisation.

Briefing note: Unlocking the potential of renewable energy for public sector and communities:  Historically, South Africa's electricity mix has relied heavily on cheap and readily accessible coal, with the country's electricity being provided through Eskom's vertically-integrated model. In 2011, the country opened up space in the electricity generation sector for private sector participation, through the Renewable Energy Independent Power Producer Procurement Programme. While this introduced renewable energy technologies into South Africa, the approach effectively locked renewable energy in the private sector, excluding Eskom, municipalities and consumers from renewable energy generation.Read the briefing note online: Unlocking the potential of renewable energy.

Published in Quarterly Bulletin

Even though data revisions are a normal feature of any statistical compilation process, such revisions are seldom taken into account or understood by users of statistics. This results in an over reliance on initially published preliminary estimates that are subject to change. Gross domestic product (GDP) estimates, for instance, are needed for the Monetary Policy Committee to set interest rates and the National Treasury to set budget limits, but because of the need for timely data, policy decisions are often based on preliminary estimates which are later revised as more comprehensive data become available. At the same time, changes to the initially published estimates may lead to adjustment measures being made to the assessment of the performance of the economy.

This brief focuses on revisions to South Africa’s quarterly GDP estimates for the period 1999 to 2013. Based on the study of revisions to the South African quarterly GDP growth rates the following conclusions are made. First, the initially announced estimates are most likely to be revised upward. This is because initial announcements of the quarterly GDP growth rates are on average underestimated. Second, a bias exists in the estimation of the initially announced quarterly GDP growth rates. This suggests that the estimates contain measurement errors that can be eliminated to become better estimates of the final or true value. The brief looks at why data revisions happen and highlights how the study of revisions can be used to evaluate the reliability of initially published estimates. It then provides an analysis of revisions to the South African quarterly GDP growth rates followed by recommendations.

  • Year 2017
  • Author(s) Asanda Fotoyi, TIPS Economist
Published in Policy Briefs