Answer to Question #205005 in Macroeconomics for Tsunami

Question

A comparison of the economic growth performance of the South African economy for 2020 with 2019

Answer 1

The Real GDP growth rate in 2019 was at 0.2%. Due to the pandemic and measures to curb and contain the pandemic, there was a decline in construction, transport communication, manufacturing, and mining. The real GDP, therefore, contracted by 8.2% in the year 2020.

On the demand side, there were reductions in demand for products and services but the highest was 32.4% in the investment sector. The banks had to reduce the cut policy rate from 6.5% to 3.5% to support the businesses and households that had been adversely affected by the pandemic in 2020.

The inflation rate declined to 3.4% in 2020 but this was within the estimated target of the Reserve Bank of 3%-6%. The budget deficit widened to more than 14% in 2020 compared to 2019. This was due to the spending pressures to contain the economic impact of the pandemic.

Domestic credit to the private sector reached $280 billion in November 2020, an increase of 3.5% from December 2019, when it was 139% of GDP.

From the above instances of change in economic parameters variation, we can conclude that there was a decline in the economy in 2020 compared to 2019.