GDP growth expected to weaken

Balance of payments, gold and foreign exchange reserves and business confidence numbers will come out this week, but economists will pay close attention to GDP figures for the fourth quarter of 2016. These are expected to show a contraction after a grim year.

GDP is expected to contract by 0.9% quarter on quarter due to an underperformance in mining and manufacturing.

On a year-on-year basis, GDP is forecast to have expanded by 0.6% in the fourth quarter. Predictions are that the economy grew 0.5% in 2016, extending the declining trend in GDP growth since 2011.

NKC African Economics economist Elize Kruger said: “The growth figure has the potential to disappoint and could be marginally negative [on a quarter-on-quarter basis]. The overall growth outcome for 2016 is still likely to be 0.4%, the lowest since the recession in 2009 and still way too low to address the unemployment crisis and social inequalities.”

Despite the contraction, economists are optimistic that SA’s economy is picking up.

Old Mutual Investment Group economist Johann Els said: “A much improved global economic environment is supporting stronger growth in SA, with a stabilising rand and lower inflation expected to pave the way for interest rate cuts in the second half of 2017.”

On Tuesday, the Reserve Bank will release data on SA’s gold and foreign exchange reserves and balance of payments status.

Stanlib economist Kevin Lings said: “Higher international commodity prices have provided welcome relief to SA’s balance of payments.”

On Wednesday, the South African Chamber of Commerce and Industry will release its business confidence index for February.

Business confidence improved in January, increasing by 3.9 index points month on month to 97.7 points.

FNB economist Mamello Matikinca warned: “Weak business confidence will weigh on government consumption and fixed investment expenditure.”