No recession, but ‘stagnant’
AGRICULTURE, TRADE THE BIGGEST LAGGARDS ‘Lurching from quarter to quarter, unable to produce sufficient job growth.’
Although SA avoided a recession by managing only 0.1% of growth in the fourth quarter of last year, the overall picture has not changed: the economy remains stagnant amid soft domestic demand and numerous supply-side growth impediments.
According to Statistics SA, real gross domestic product (GDP) increased by 0.1% in the fourth quarter of 2023, after contracting by 0.2% in the third quarter. The latest indicators show that real GDP increased by 0.6%, after an increase of 1.9% in 2022.
“The results for the fourth quarter were on par with our expectation of +0.1%, but lower than the forecast of +0.3%,” Jee-A van der Linde, senior economist at Oxford Economics Africa, says.
Agriculture declined by 9.7% due to reduced output in crops, horticulture goods and animal products. Mining was up by 2.4%, buoyed by increased production of platinum group metals, chromium ore, coal and diamonds.
Contributing to the slight increase in the secondary sector in the fourth quarter was manufacturing (+0.2%) and electricity, gas and water (+2.3%), but this was offset by a 1.4% drop in construction.
The tertiary sector was a mixed bag, boosted by transport (+2.9%), personal services (+0.9%) and finance (+0.6%), while trade (-2.9%) and government services (-0.6%) contracted.
Van der Linde says agriculture and trade were the biggest laggards in the fourth quarter, while transport and mining were the best performers. “However, we do not foresee any meaningful improvement in the economy over the near term as structural constraints, together with a high-cost environment weigh on growth prospects.”
He points out that the economic upturn in the fourth quarter was soft, following the 0.2% contraction in the third quarter.
“It is evident that the economy is lurching from quarter to quarter, unable to produce sufficient job growth and expand the supply of goods and services.
“Years of chronic underinvestment lies at the heart of South Africa’s growth problem.
“We maintain our view that SA entered 2024 with hardly any economic momentum and real GDP growth is expected to pick up only modestly to reach 0.7% this year, compared to the consensus forecast of 1.2%.”
Van der Linde expects that supply-side constraints will continue to undermine growth for most of the year, with the peak impact of tighter monetary policy also likely to still weigh on consumers’ pockets during the first half of the year.
Prof Bonke Dumisa, an independent economic analyst, says the mere 0.1% GDP economic growth rate saved SA from a technical recession, because another negative economic growth rate would have moved South Africa to a technical recession, due to the -0.2% negative GDP growth rate in the third quarter of 2023.
“We just have to be content with the 0.6% total annual GDP economic growth rate for 2023, despite that 0.6% being very low compared to our population growth rate, which is many times higher. This is totally unsustainable.”
Prof Raymond Parsons, economist at the North-West University Business School, says the good news is that SA narrowly avoided a technical recession with a scant GDP growth rise of 0.1%, although there were fears in some quarters that the fourth-quarter growth figures might also be negative.
“The bad news is that, on the basis of economic growth now being just 0.6% for 2023 as a whole, the economy is likely to see only about 1% of economic growth this year. This is more or less in line with most recent growth forecasts, but is still simply too low to meet South Africa’s socioeconomic challenges.”
He says the 0.2% decrease in gross fixed capital formation in the fourth quarter remains a red flag. –
Economy likely to see only 1% of economic growth