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When will the SA economy recover from the pandemic crash?

by , 17 February 2022
When will the SA economy recover from the pandemic crash?
In 2020 the South African economy saw an unprecedented crash because of the Covid-19 pandemic.

In dollar terms our country's GDP dropped from $351.4 billion to $301.92 billion.

That's roughly R740 billion that disappeared from our GDP overnight.

Tourism came to a halt.

Restaurants, hotels, gyms and car dealerships hit a massive slump.

Property, specifically office space became a hot potato.

But since then, things have improved.

But is it enough?
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How soon will we reach a pre-pandemic recovery?
According to TradingEconomics.com the SA economy recovered to around $320 billion GDP level in 2021, and should hit $345 billion in 2022. That’s nearly back to pre-pandemic levels.
Including the effects of inflation – we’re likely to only see the full recovery by end of 2023.
In fact, based on this forecast, and forecasts by the Economist Intelligence Unit (EIU) South Africa is the only G20 country that will not return to pre-pandemic levels in 2022.
Global forecasting director at the EIU, Agathe Demarais, highlighted that South Africa is among the slower-recovering G20 states - lagging behind Argentina, Mexico and Japan.
And according to Investec chief economist, Annabel Bishop, South Africa’s "downward growth trend in GDP of the 2010's decade is expected to be reversed in the 2020's decade, as expectations persist for the fruition of the structural reforms, government continues to outline, lifting the real economy by 3.0% y/y in 2026".
Investec expects growth close to 2% in 2022. Other economists expect between 2% and 3% growth in GDP for South Africa in 2022.
Retail and property have recovered better than expected
Initially in the early stages of the pandemic expectations were that retailers, and property companies would struggle badly going forward.
But by June 2021 consumer spending had all but returned to 2019 levels. This was negatively affected by the July riots… But has since turned around again.
Shoprite for instance released a trading statement for the six months ended January 2022 this week.
Despite the July riots being part of this period, Shoprite expects a 20%+ increase in profits per share…
Pick n Pay’s 2019 interim results had revenue come in at R43 billion. October 2021 the company announced interim revenue at levels around R46 billion.
Think that property has been struggling? Well, sure there are a lot of vacancies in the office sector. But consider these results from property company Attacq:
But for three exceptions all of their properties have shown growth year on year compared to 2020’s November and December. Average growth of 8.15% is more than inflation – and means that at least we’re seeing a recovery in volumes and not just growth due to inflation.
Compared to 2019 all their malls, except Brooklyn Mall have grown. Hence turnover is back at 2019 levels. Many thought we’d only see that happen in 2023 – but retail revenues are back to pre-pandemic levels.
I suspect the picture still looks different for some manufacturers who are dealing with supply chain issues, and then the tourism sector is still far from a recovery to pre-pandemic levels as well. But this is positive news, not just for Attacq, but the economy as a whole.
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One of my favourite economic indicators is turning up fast
I’ve always liked using new car sales as an economic indicator.

It shows us a couple of things:
•    Consumers have confidence to make big buying decisions
•    Consumers have disposable income
•    Banks have appetite to extend credit
And all of these things point towards an improvement in the economy.
Now considering this – let’s look at new car sales:
January 2022 car sales increased 19.5% on January 2021 sales. New vehicles hit 41,000 sales for January. The trailing average for car sales is now at its highest since the pandemic started – so it is clear that we are in a continuing upward trend.

Here you can clear see that car sales hit a standstill in 2020 and has been steadily trending upwards. Sales are now nearly back at 2019 levels.
Even restaurants are returning back to normal…
In its latest sales update, the Spur group showed a 28.3% average growth in total restaurant sales for the 6 months ending December 2021 vs the six months ending December 2020.
At this point the company says sales are 9.5% below pre-covid levels.
All of this has happened whilst the tourism sector is at a standstill. Estimates are that tourism added $22.1 billion to the SA economy in 2019. My guess is we’re currently at half that level. So, an extra R165 billion could be added back into our economy as tourism normalizes and returns back to pre-pandemic levels.
This likely won’t happen by end 2022, but I am optimistic for it to happen by end 2023.
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When will the SA economy recover from the pandemic crash?
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