Rand breaks below R15.00 vs dollar on better than expected GDP growth

Thor

Thor

Honorary Master
Joined
Jun 5, 2014
Messages
44,240
This headline sounds incredible! Here's why 66% GDP growth is FAR LESS impressive than it actually sounds.

1. Base effects make it look good

Q2 2020 GDP DOWN 51.7%
Q3 2020 GDP UP 66.1%

What's a base effect?

If a Birkin is $100k & goes on sale at 50% it's now $50k. Then the price shoots up by 70%, it's now $85k (still $15k lower)

Math not meth!

2. Bigger isn't always better....

66.1% is an annualized figure. This assumes SA will grow at the same pace for 4 straight quarters. If you don't annualize, SA grew 13.5% from the previous quarter.

If you think annualizing is daft - StatsSA also agree. This could change soon.

3. Comparisons are misleading

Are we actually better off than last year?

No, we're worse off. GDP shrank by 6% compared to the same period last year.

4. How long will it take us to get back to pre-COVID levels?

Many analysts feel it could take a few years for us to get back to these levels (up to 5 years). In short - our problems are highly unlikely to ever get fixed in a single quarter.

5. But the ZAR is getting stronger?!

If you come across a politician proudly boasting about Rand strength & taking full credit - feel free to jump them

A massive driver of ZAR strength is relentless Fed stimulus & a shift towards broader inflows into emerging markets (risk-on)

6. Okay, GDP stats are ****ed, how do you know whether SA is healthy?

Unemployment is at the worst level in 17 years. That's over 30% (narrow definition) & over 40% (broad definition)

Overlay our massive debt problems, dysfunctional SOEs & absent governance - it's bleak.
 
G

Groggyme

Well-Known Member
Joined
Apr 10, 2015
Messages
445
Thor said:
This headline sounds incredible! Here's why 66% GDP growth is FAR LESS impressive than it actually sounds.

1. Base effects make it look good

Q2 2020 GDP DOWN 51.7%
Q3 2020 GDP UP 66.1%

What's a base effect?

If a Birkin is $100k & goes on sale at 50% it's now $50k. Then the price shoots up by 70%, it's now $85k (still $15k lower)

Math not meth!

2. Bigger isn't always better....

66.1% is an annualized figure. This assumes SA will grow at the same pace for 4 straight quarters. If you don't annualize, SA grew 13.5% from the previous quarter.

If you think annualizing is daft - StatsSA also agree. This could change soon.

3. Comparisons are misleading

Are we actually better off than last year?

No, we're worse off. GDP shrank by 6% compared to the same period last year.

4. How long will it take us to get back to pre-COVID levels?

Many analysts feel it could take a few years for us to get back to these levels (up to 5 years). In short - our problems are highly unlikely to ever get fixed in a single quarter.

5. But the ZAR is getting stronger?!

If you come across a politician proudly boasting about Rand strength & taking full credit - feel free to jump them

A massive driver of ZAR strength is relentless Fed stimulus & a shift towards broader inflows into emerging markets (risk-on)

6. Okay, GDP stats are ****ed, how do you know whether SA is healthy?

Unemployment is at the worst level in 17 years. That's over 30% (narrow definition) & over 40% (broad definition)

Overlay our massive debt problems, dysfunctional SOEs & absent governance - it's bleak.
Click to expand...
Great write-up! We are in such a precarious position economically. All these gains are on the back of the terrible drop we experienced in Q2. People need to remember that COVID did not start our economic woes. Things were not looking good even before this. Analysts have pointed to 3-5 years for recovery but I think that it can be sooner if we have get the vaccine rolled out sooner rather than later and focus on a "business first" approach to the economy. I think, however, that will not be the case as the government sucks at implementing anything and only wants to do stakeholder engagement and have meetings.
 
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