South Africa's GDP contraction could be the worst on record – outdoing that of the global financial crisis of 2008, according to Investec chief economist Annabel Bishop.

In a note on the latest business cycle indicators issued by the Reserve Bank on Tuesday, Bishop highlighted that the co-incident indicator – which measures economic activity – for April fell by 26.8%, compared to the previous year. This is "the largest collapse on record," Bishop said. Month-on-month, the co-incident indicator fell by 22% from March.

During April, lockdown restrictions were at level 5, essentially bringing economic activity to a complete halt apart from essential services which were allowed to operate.

The Reserve Bank said the lockdown, and the "significant contraction" in the industrial production index and the vehicle sales for April which plummeted by 98.4% were major drivers of the decline.

Contractions worse than 20% for the co-incident indicator have never been recorded, commented Bishop.

During the Great Recession of 2008/09, the worst month recorded a co-incident indicator of -12.8%, and a year-on-year contraction of -0.7%. Apart from the latest figures, the worst recorded co-incident indicator for economic activity was a 19.2% annual drop recorded in March 1977.

In 1998 the Reserve Bank's co-incident indicator contracted by only -9.5% year-on-year in its worst month. "In 1983, in the run-up to SA's partial debt default in 1985 (on its foreign currency debt holdings), the co-incident indicator contacted by -15.2% y/y in its worst month in that period," said Bishop.

Bishop expects the co-incident indicator for May also to reflect a large contraction, despite more parts of the economy reopening.

Overall the composite leading business cycle indicator decreased at a slower pace of 0.7% in May, the Reserve Bank said. Six of the nine components decreased. 

The composite lagging business cycle indicator decreased by 13.4% month-on-month for April.

"We continue to expect that South Africa’s GDP contraction this year (2020 y/y) will be the worst on record," Bishop added.

Investec has pencilled in a 48.2% contraction in second quarter GDP, while the Reserve Bank projects a 32.6% contraction.

Overall, Investec expects a 10.1% contraction in GDP. Treasury expects a GDP contraction of 7.2%, the worst in 90 years.