COMMENT | The mirage of economic recovery

COMMENT | The eagerly awaited economic growth figure for the second quarter announced on Friday was hailed as a signal of recovery with a rebound in the gross domestic product (GDP) of 16.1 percent compared to the same period last year.

According to our analysis, the situation is very different and the most likely scenario for the rest of the year will be ugly or even very ugly unless there is a significant change in policy.

The “tipping point” that we have identified before in our series of analyses has already arrived and in reality, the latest very worrying data for the second quarter leave no doubt about it. It confirms all of the concerns already highlighted by entrepreneurs and households in industry surveys that a vicious cycle and recessionary spiral may have already started.

The annual (Y-on-Y) headline growth figure of 16.1 percent is misleading because it depends so heavily on recovery from the very low base in Q2 2020. It is much more informative to focus on the “traction” of the economy, reflected in the quarterly (Q-on-Q) change in GDP and its components.

Seasonally adjusted GDP fell by two percent in Q2 compared to Q1, when it