What is GDP and its impact?


Government and all businesses, from small to multinational, need the facts on the economy that this release provides. Aneen Jordaan reports

The gross domestic product (GDP) of a country is one of the main indicators used to measure the performance of a country’s economy. The Macmillan dictionary defines economy as the system by which a country’s trade, industry and money are organised. GDP can be thought of as the total value of all goods and services produced within the borders of a country during a specific period of time, usually a year or a quarter.

Investopedia explains, “Economic production and growth, what GDP represents, has a large impact on nearly everyone within [the] economy”. When GDP growth is strong, firms hire more workers and can afford to pay higher salaries and wages, which leads to more spending by consumers on goods and services.

Firms also have the confidence to invest more when economic growth is strong, and investment lays the foundation for economic growth in the future. When GDP growth is very low or the economy goes into a recession, the opposite applies (workers may be retrenched and/or paid lower wages, and firms are reluctant to invest).

First quarter results and its impact

Statistics South Africa publishes GDP estimates every quarter. The GDP annualised growth rate slowed down to 0,9% for the first quarter of 2013 (January to March), which was lower than what were expected by South African economists.

The previous quarter (October to December 2012) showed an annualised growth of 2,1%.

The biggest contributor to growth in the first quarter of 2013 was finance, real estate and business services, which expanded by R7 billion to R161 billion. Other notable performers were:

  • Agriculture, forestry and fishing expanded by R4 billion to R14 billion;
  • Construction expanded by R4 billion to R31 billion;
  • Wholesale, retail and motor trade and catering and accommodation decreased by R15 billion to R115 billion;
  • Transport, storage and communication decreased by R5 billion to R63 billion;
  • Mining and quarrying decreased by R3 billion to R63 billion.

Although the GDP growth slowed down in the first quarter of 2013, the growth was still positive and the economy expanded compared to the previous quarter. Before the global financial crisis of 2008, the South African economic growth rate was much higher (over 5% per year).