South Africa’s GDP Grows By 4.6% In Q1 On An Annualised Basis.
The struggling South African economy grew by 4.6% in quarter 1 on an annualised basis. That means if we continue on this trajectory the economy would grow by 4.6% over the period of 2021. In quarter 1 alone the Gross Domestic Product(GDP) grew by 1.1%.
What does these numbers mean?
There is no denying that Covid-19 has destroyed most economies around the world, especially the emerging economies. South Africa experienced a 7% contraction in GDP with thousands of consumers losing their source of income and therefore weakening demand. Now we are in the middle of the pandemic and for the sake of the economy, the country is open for business again. As the country is opening up again, economic activities resume and individuals are going back to work again demand increases and therefore leads to sales increase, from sales to profit increase and ultimately economic growth.
When we look deep into the statistics we find that consumption has increased while capital fixed formation which is investment has declined. We find that individuals are spending more on leisure activities, travelling, things they have not been doing as a result of Covid-19. However that is dangerous from economics point of view because there are investments that are being and an economy built on consumption is unstable and not sustainable. These statistics reveals that there is per capita income is increasing, there is improvement at a household level which fuels the economy.
The finance and mining industry.
The finance and the mining industries were key sectors that contributed to the 1.1%. From quarter 4 of 2020 to quarter 1 2021 mining contributed 18.1% and finance 7.4%. One thing we should bear in mind is that these figures are relative to the contractions that have been happening due to Covid-19, implying that we have a very low base and that the growth simply is due to the economy opening back up again and we are no near pre-Covid-19 conditions. The growth simply reveals the recovery of the economy.
