South Africa has officially entered recessionary territory as gross domestic product (GDP) numbers for quarter four of 2019 show that the economy shrank 1.4%.
The fall means the country now finds itself in a technical recession which can be described as two consecutive quarters of negative growth after the economy declined by 0.8% in quarter three.
In total the economy in 2019 grew 0.2%.
The growth is less than the already lacklustre projections by the IMF, World Bank and Moody’s rating agency which said the economy would grow by 0.7%, the Reserve Bank’s 0.6% and National Treasury’s paltry 0.3% estimate.
— Stats SA (@StatsSA) March 3, 2020
The previous recession the country had was in the first half of 2018 largely attributed to the power cuts experienced due to Eskom.
Sectors by sector
Only three out of the ten production sectors contributed positively to the GDP with the largest negative contribution coming from the transport, storage and communication industry which decreased 7.2% contributing -0.6% of percentage growth.
The diminished economic activity was reported for land and air transport, as well as transport support services.
The second most notable dip is in the trade industry which contributed a 0.5% contraction to economic growth after decreasing by 3.8% due to a dip in economic activity in the wholesale and motor trade and accommodation.
Stats SA could not quantify the exact impact of load shedding but suggested that the power cuts experienced in the first two weeks of December had a marginal impact on the numbers and that the largest impact came from economic demand, said Joe De Beer, deputy director-general, Stats SA.
“We have had indications especially when you unpack the trade sector that the declines came from wholesale which is mostly linked to the drop that we see in imports,” he said.
“In the business services sector we still recorded positives which makes one think that load shedding might not have had such a big impact in this quarter,” De Beer said.
The expenditure figures also show the same recessionary pattern that was seen in the first half of 2018 as expenditure figures declined by 1.2% in quarter four after a 0.4% drop in quarter three.
Gross fixed capital formation showed the greatest dip of 10% and subtracted -2% to the expenditure side of GDP. The main contributors to the decrease were machinery and equipment, non-residential buildings and other assets.
De Beer said investment in the economy has been “lagging overtime” where over the last five years or 20 quarters, there have only been six quarters of positive investment numbers.