GDP data may show that SA sidestepped recession
The focus this week will be on the release of fourth-quarter GDP on Tuesday and the release of current account data by the Reserve Bank on Thursday.
In the third quarter of 2023, the economy contracted unexpectedly 0.2% quarter on quarter, after a downwardly revised 0.5% rise in the second quarter, worse than market forecasts of a 0.1% fall, indicating reduced activity across five out of 10 sectors, with the agriculture, forestry & fisheries sector experiencing the most significant decline.
Economists expect fourthquarter GDP growth to keep reflecting the effect of energy constraints and the logistical inefficiency on the production side of the economy. On the demand side, they expect consumer spending to have been dampened by elevated interest rates and the weak labour market.
FNB chief economist Mamello Matikinca-Ngwenya said they expected the economy to have recovered, expanding 0.7% quarter on quarter.
“This growth is expected to be supported by a rebound in the mining and transport sectors, as well as continued momentum in the electricity, gas and water sectors,” said Matikinca-Ngwenya. “We have also assumed a rebound in the agriculture sector, although this sector remains a source of twosided risk.”
Bureau of Economic Research economist (BER) Tracey-Lee Solomon, economist said that after the third-quarter contraction the BER expected a slight quarterly expansion in quarter four, “meaning the economy is set to avoid slipping into a technical recession. Our full-year forecast is at 0.6% growth for 2023, but the available high-frequency data suggests that an upward surprise in fourth quarter and, by extension, the full-year growth figure is possible,” Solomon said.
“From the expenditure side, the big uncertainty is around the impact of the intense harbour and rail disruption on net trade and inventories.”
Nedbank expects the economy ended 2023 with modest growth of 0.3% quarter on quarter, translating into a growth rate of 0.5% for 2023.
On Wednesday, the RMB/BER business confidence index for the first quarter will be published. The index slipped by two points to 31 in the final quarter of 2023.
The Reserve Bank will publish current account data for the fourth quarter on Thursday. The deficit for the third quarter narrowed to R19.3bn from R185.2bn (revised from R160.7bn) in the second quarter. As a percentage of GDP, the current account deficit was 0.3% against 2.7% previously.
Reserve Bank data showed the narrowing of the deficit was supported by a lift in the trade surplus on goods, from 0.3% of GDP to 2.7%, as import values (volume effect) declined faster than export values (price effect).
Matikinca-Ngwenya said weaker terms of trade relative to last year and local infrastructure constraints should continue to apply downward pressure on the trade balance. Expectations were for a wider current account deficit over the forecast period, she said.
Nedbank senior economist Isaac Matshego said the current account probably widened to a deficit of 1.5% of GDP in the fourth quarter from 0.3%.
“The shortfall will likely be driven by a smaller trade surplus following muted global demand, lower commodity prices and persistent domestic structural constraints,” said Matshego. He said growth in import volumes probably remained relatively robust.
“The nontrade deficit narrowed, helped by increased income receipts from higher tourist arrivals during the festive season,” he said. “However, the upside will be partly contained by services and income payments.”
Also on Thursday, the Bank will publish data on foreign exchange reserves for February. Gross foreign reserves amounted to $61.19bn in January, reflecting a reduction of $1.33bn from the $62.52bn recorded in December 2023.
Matshego said gross reserves were projected to have broadly remained steady at around $61.2bn in February as the marginal growth in foreign exchange reserves was offset by a decline in gold reserves.
He said the international liquidity position was likely to have dropped slightly to $56.5bn from $56.7bn.
“However, the rand value of reserves rose as the rand depreciated against the US dollar during the month. Import cover will likely remain at around seven months,” he said.