GDP slump: there’s work to be done

South Africa’s gross domestic product (GDP) growth rate slowed to 0.2% in the third quarter, a major drop from the 3.3% in the second quarter of this year, Statistics South Africa (StatsSA) said yesterday.

Four industries – agriculture, forestry and fishing; manufacturing; electricity, gas and water; and trade, catering and accommodation – contributed to the contraction in the third quarter between July and September.

StatsSA said the agriculture, forestry and fishing industry had been in decline for seven consecutive quarters.

The fall in manufacturing, according to StatsSA, was as a result of a drop in the production of petroleum and chemicals, basic iron and steel.

Despite this, there were some positives as real expenditure on GDP was up by 0.5% quarter-on-quarter and household consumption expenditure rose by 2.6%.

StatsSA said the main contributors to the GDP growth rate were the mining and quarrying industry; finance, real estate and business services; and general government services.

Mining and quarrying increased by 5.1% largely as a result of higher production in the mining of other metal ores, in particular iron ore.

StatsSA said local government elections also contributed positively to growth in the general government services for the third quarter.

Economist David Crosoer, executive of research and investments at PPS Investments, said the latest GDP figures were disappointing.

“The latest disappointing quarterly GDP number of 0.2% reminded investors that a lot of work still needs to be done to restore investor confidence, notwithstanding the decision by all three ratings agencies recently not to downgrade South Africa to sub-investment grade,” Crosoer said.

South Africa also survived a junk status credit rating from Standard and Poor’s, Fitch and Moody’s rating agencies.

“Although the country has been put one notch above investment grade, unless our economic growth surprises significantly on the upside in future, we still face difficult choices as a nation to bring our overall debt levels to a more sustainable basis,” Crosoer said. – ANA

Disappointing quarterly GDP number of 0.2% reminded investors a lot of work still needs to be done to restore investor confidence. David Crosoer PPS Investments