Longest Recession in 28 Years as Lockdown Zaps South Africa’s Already-Ailing Economy
South Africa’s restrictions to curb the spread of the coronavirus put the economy into its longest recession in 28 years, with gross domestic product contracting more than expected in the second quarter.
“The punch in the gut was severe. Perhaps the second quarter of 2020 will become known as the pandemic quarter,” Statistics South Africa said Tuesday upon release of GDP data.
GDP shrank an annualized 51% (16.4% quarter-on-quarter) in the period through June from the previous quarter, following a revised 1.8% contraction in the first three months, Statistics South Africa said.
A strict nationwide lockdown from March 27 deepened the slump in an economy that’s stuck in its longest downward cycle since at least World War II. Enforced by the police and military, people were allowed to leave their homes only to buy food, collect welfare grants and seek medical care unless they provided essential services.
While a gradual re-opening of the economy started on May 1, many companies closed down permanently or fired workers during the shutdown.
The median estimate of 17 economists in a Bloomberg survey was for a 47.2% drop in output from the previous quarter. Year-on-year, the economy contracted 17.1%.
The continued contraction will weigh on revenue collection and the government’s efforts to stabilize debt and narrow the budget deficit. It will also make it more difficult to lower the unemployment rate of 30.1% that’s seen as a key hurdle to reducing poverty in one of the world’s most unequal nations.
The government will use the crisis to “build a new economy” and a recovery strategy that includes plans to fast-track reforms, boost infrastructure investments and promote localization will soon be unveiled, President Cyril Ramaphosa said.
“We cannot continue with business as usual.”
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