The Real Economy Bulletin – 2nd Quater

The Real Economy Bulletin is a Trade & Industrial Policy Strategies (TIPS) review of quarterly trends, developments and data in the real economy, together with an analysis of the latest growth and employment figures from the main manufacturing industries and key data in Excel format.

The GDP: As expected, the GDP dropped sharply, by 16% in seasonally adjusted terms, in the quarter ending in June 2020 as a result of the COVID-19 pandemic. Economic activity crashed in April, during the strict Level 5 of the lockdown. The gradual relaxation in restrictions since then have seen a bounce back to near pre-pandemic levels. Still, COVID-19 continues to pose a threat, limiting recovery especially in tourism and recreational services even in the absence of regulations. Moreover, long-standing structural challenges and declines in major trading partners will slow recovery. Read more.

Employment: Because it is difficult to undertake household surveys during a pandemic, the Quarterly Labour Force Survey has been delayed until late October. As a result, there are no official figures for second quarter employment. Read more.

International trade: The pandemic brought a sharp slowdown in global trade as a result of blockages to transport as well as falling international demand. For South Africa, the second quarter of 2020 saw a strong decline in goods exports, combined with an even stronger slump in goods imports. Only agricultural exports performed well, increasing by 14.2% in dollars and, thanks to depreciation, by 38% in constant rand terms. Read more.

Investment: Investment tumbled in the second quarter. Monthly data are not available, however, so it is not clear if there was any recovery over the quarter. Private investment fell by a fifth, investment by state-owned companies by a third, and general government investment remained almost unchanged. As a result, in the second quarter of 2020 investment fell to 16% of the GDP from 17% in the first quarter. That is the lowest investment rate since 2010. Read more.

Foreign direct investment projects: The TIPS FDI Tracker tracks foreign direct investment projects on a quarterly basis, using published information. Eight projects were recorded this quarter, and two projects were updated in status. The total quantum of new investments recorded was approximately R2.6 billion, from six projects. Read more.

Briefing note: Stimulating consumer spending post COVID-19 lockdowns: Consumption spending by households is an important driving force of an economy. In 2019, household consumption spending accounted for 61% of the R5.1 trillion expenditure on gross domestic product. Spending on essential goods and services such as food, transport, health, and education accounted for 62.3% (or R1.9 trillion) of final household consumption. Spending on non-essentials like recreation and culture as well as restaurants and hotels accounted for 7.2% (or R219.6 billion) of final household consumption. However, in 2020, the COVID-19 lockdown has and will continue to negatively impact consumer spending in the absence of alternative incomes or financial resources for those consumers. Read the briefing note online: Stimulating consumer spending post COVID-19 lockdowns.

Briefing note: Unblocking the potential of South African green hydrogen in trade: Globally, countries are mobilising sizeable resources towards dealing with the climate crisis, and with the COVID-19 pandemic many countries and regions have attached sustainability criterion to their recovery packages. EU Member States, for example, have attached strict mitigation regulations to COVID-19 rescue packages and state recovery support in sectors with limited options for decarbonisation, such as aviation. Further, as part of the transition to sustainable production, trade barriers against high carbon exporters through policy tools such as border carbon adjustments are expected from large trading blocs such as the EU from as early as 2023. The climate policy responses by countries to changing trade policies differ, however, what is certain is that the nature of trade, production and investment will change in this transformation. Read the briefing note online: Unblocking the potential of South African green hydrogen in trade.

The Real Economy Bulletin has the following attachments:
Full Second Quarter 2020 Bulletin
Data for Real Economy Bulletin Q2 2020 (compiled in September 2020)

The Real Economy Bulletin is a Trade & Industrial Policy Strategies (TIPS) Publication

For previous editions go to The Real Economy Bulletin

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