South Africa’s longest recession in 28 years is over

South Africa came out of its longest recession in 28 years as the economy rebounded more than projected in the third quarter when most of the curbs to contain the spread of the coronavirus were eased.

GDP expanded an annualised 66.1% in the three months to September from the previous quarter, following a revised 51.7% decline in the three months to June, Statistics South Africa said on Tuesday. That’s the strongest growth since at least 1990 and the first positive number after four quarters of contraction. The median estimate of 14 economists in a Bloomberg survey was for a 54.4% increase in output.

On a non-annualised basis, the economy expanded 13.5% from the previous quarter. Compared to the same period last year, GDP contracted by 6%, the second straight quarter of decline.

The rebound in the quarterly figure was expected as output resumed after most activity was shut for much of the second quarter due to the strict nationwide lockdown. The recovery remains vulnerable, with power shortages and slow structural reforms likely to weigh on sentiment.

For the nine months to September, GDP contracted by 7.9% from last year. That’s the clearest indication of how much the economy could shrink for the full year and is in line with forecasts from the government and central bank.

A resurgence in Covid-19 cases in Europe and the US has hit some of South Africa’s major trading partners and sources of tourism income, while a rise in infections at home could see some restrictions reimposed. That would make it more difficult to bring down the official unemployment rate that returned to a 17-year high in the third quarter, improve revenue collection and curb a wide budget deficit and surging government debt.

Spending

Household spending, which makes up about 60% of GDP, increased by an annualised 69.5% from the second quarter. Investment as reflected by gross fixed capital formation, grew 26.5%.

Getting back to pre-pandemic output levels will take time because “sharply lower investment this year by both public and private sectors will weigh on growth prospects in coming years,” the central bank said last month.

The rand gained 0.4% to R15.08 against the dollar by 11.55am in Johannesburg, having earlier reached the strongest level since February.  — Reported by Monique Vanek and Lwazi Maseko, (c) 2020 Bloomberg LP