Coronation Economic Flash Note: GDP – Q2 2021

The national accounts for Q2 2021 by the NBS show that GDP grew by 5.0% y/y compared with 0.5% recorded in Q1 2021. This is in line with our expectation. Given the output figure registered in the corresponding period of 2020, positive base effect contributed largely to this relatively healthy growth figure. However, we note that the 5.0% y/y growth for Q2 is partly attributed to the gradual resumption of economic/business activity following the ease in restrictions as at end-2020.

• The oil economy contracted by -12.7% y/y in Q2 compared with a contraction of -2.2% y/y in the previous quarter. Based on data from the NBS, average crude oil production in Q2 was 1.61mbpd, compared with 1.72mbpd in the previous quarter and 1.81mbpd in Q2 2020. Meanwhile, the non-oil economy grew by 6.7% y/y compared with growth of 0.79%y/y in Q1. Key drivers were telecommunications (5.9% y/y), manufacturing (3.5% y/y) construction (3.7% y/y), trade (22.5% y/y) as well as agriculture (1.3% y/y).
• Agriculture grew by 1.3% y/y compared with 2.3% y/y recorded in Q1. Crop production accounted for 89% of agriculture GDP and grew by 1.4% y/y. We also note that the livestock, forestry and fisheries segments grew by 0.1% y/y, 1.1% y/y and 2.3% y/y respectively but each from a low base. The sector’s underperformance can be partly hinged upon insecurity in specific farming areas, storage and logistics challenges, among others.
• Telecommunications posted growth of 5.9% y/y. The sector enjoyed double-digit growth in each quarter of 2020. The ongoing remote working as well as educational services for schoolchildren triggered by the pandemic have supported growth in this sector. Entertainment via streaming services have picked up significantly and has also contributed to the sector’s growth.
• In Q2, real estate and construction grew by 3.9% y/y and 3.7% y/y respectively. The growth registered for both sectors could be attributed to development activities on the back of recommencement of delayed projects which were paused due to the slowdown triggered by the pandemic.
• The manufacturing sector grew by 3.5% y/y in Q2 compared with 3.4% recorded in Q1. Within the sector, the food and beverages segment posted growth of 4.9% y/y compared with 7.1% recorded in the previous quarter (and accounted for 50% of total manufacturing GDP) while the textile, apparel and footwear segment grew by 1.8% y/y. The cement segment grew by 3.9% in Q2.
• Over the past quarters, demand has been generally soft. This has been evident in the performance of trade which posted consecutive contractions in each quarter of 2020 and in Q1 2021. However, trade grew by 22.5% y/y in Q2. In addition to base effects, we suspect that the release of pent-up demand, particularly for consumers within the middle-income bracket may have supported increased trade activities. We also note that supply chain disruptions which peaked in Q2 2020 have eased slightly.