Economy grows to pre-pandemic levels

South Africa’s economy expanded by 1.9% in the first quarter of 2022, with eight industries recording positive growth.

After an increase of 1.2% during the fourth quarter of 2021, the further expansion in the first three months of this year took the economy back to pre-pandemic levels.

The sectors that contributed to the growth are manufacturing, which increased by 4.9% during the quarter; trade, catering and accommodation(3.1%); finance, real estate and business services (1.7%) and personal services (1.1%), according to data released by Statistics South Africa on Tuesday.

The mining and quarrying sector declined by 1.1% in the first quarter, with decreased production reported for platinum group metals as well as iron ore and gold.

The construction industry dipped by 0.7% in the first quarter, while contractions were reported for residential buildings and other construction work.

Statistics South Africa reported that household final consumption expenditure increased by 1.4%, with a 6.5% increase in spending on restaurants and a 2.5% increase on food. Government final consumption expenditure added 1% and gross fixed capital formation advanced by 3.6% in the first quarter.

Prior to the release of the data, Nedbank economists had predicted that the momentum built in the last quarter of 2021 would be carried through into 2022.

But the economy was somewhat weighed down in January and February by electricity load-shedding, and Russia’s war in Ukraine took its toll in March.

Overall, the economy benefited from improved finances and the removal of Covid-19 lockdown restrictions.

According to the Bureau for Economic Research (BER), highfrequency activity and survey data suggests that the economy sustained good momentum at the start of the year after the recovery in the fourth quarter of 2021.

“Based on the BER survey results for the 2022 first quarter and anecdotal evidence, our expectation is that the loosening of lockdown restrictions at the end of 2021 and the decline in Covid-19 infections after the Omicron wave boosted services sector activity,” the bureau said.

In the budget tabled in February, the treasury said it expected the economy to reach a pre-pandemic GDP level this year.

But second-quarter GDP numbers could be dampened by the floods that hit Kwazulu-natal.

In addition, there are likely to be further harms caused by the Russiaukraine war, in particular the rising costs of fuel and food.