GDP up 2.2% as South Africa exits recession
Surge in manufacturing, agriculture and transport sectors drives growth
SA broke free of recession on Tuesday when it reported GDP growth of 2.2% for the third quarter, the statistics authority said, marking a positive economic trajectory ahead of elections.
President Cyril Ramaphosa, who took power in February, has pledged to revive the listless economy ahead of polls due in May by attracting $100bn in foreign investment and by fighting corruption.
The growth, which contrasted sharply with the second quarter’s 0.4% contraction, was driven by a surge in the manufacturing, agriculture and transport sectors, Stats SA said in a statement.
The announcement follows a strong week for the local rand currency which has benefited from a detente in the US’s trade war with China.
The rand was the second strongest performing of all developing countries against the dollar since Friday, gaining 1.81% according to Bloomberg.
Lukman Otunuga, an analyst at FXTM foreign exchange, said in a note to investors that the country’s exit from recession would boost “confidence over the South African economy and investor appetite towards the rand”.
The purchasing managers’ index published by Absa’s Bureau for Economic Research on Monday showed that factory orders had bounced back from a 15-month low.
Manufacturing was up 7.5% in the third quarter compared to the second, Stats SA said.
But finance minister Tito Mboweni’s mid-term budget statement delivered in October slashed SA’s 2018 growth forecast from 1.5% to 0.7%.
Mboweni is the country’s fifth finance minister in three years after his respected predecessor Nhlanhla Nene resigned in October.
The country’s economic performance is seen as crucial to bolstering the ruling ANC’s standing ahead of national polls due in May 2019.
Voters have been buffeted by soaring fuel prices and a weak local currency while unemployment is stubbornly high at about 28% – rising to over 50% for young people.
Growth was driven by the manufacturing sector, which expanded 7.5%, financial services, which expanded 2.3%, and the transport, storage and communication industry, which increased 5.7%.
The trade, catering and accommodation industry increased by 3.2%.
Mining weighed on growth, with a contraction of 8.8%.
Revisions were made for the second quarter from a 0.7% contraction to one of 0.4%, based on more information from mining, manufacturing and trade.
Growth for the year, however, will still remain low. The SA Reserve Bank expects growth of 0.6% while the treasury expects 0.7%.
This comes after SA plunged into recession in the first half of 2018 for the first time since the global financial crisis with two consecutive quarters of contraction.
Growth in the first half of the year was driven down by large contractions in the agricultural sector.
The sector, however, rebounded in the third quarter with growth of 6.5%.
Manufacturing expanded by 7.5% and financial services by 2.3%