Growth slows in third quarter

Economic growth falls short

SOUTH Africa’s economy barely grew in the third quarter of the year, which means measures should be fast tracked to accelerate growth to take advantage of the reprieve that the country got by the rating agencies.

Gross domestic product (GDP) expanded by only 0.2 percent in the second quarter between July and September, compared with a revised 3.5 percent in the second quarter, Statistics SA said yesterday.

The figure was just shy of the 0.5 percent expected by the market.

The rand firmed 0.6 percent in response to the release of the data, touching a session high of R13.64 to the dollar from R13.73 before the release.

The economy expanded by 0.7 percent from a year earlier.

The economy would probably expand at the slowest pace this year since the 2009 recession, analysts said.

Mining production rose 5.1 percent and the finance industry grew by 1.2 percent.

The meagre growth in the quarter was led by a 3.2 percent decline in the manufacturing sector, followed by a 2.8 percent decline in the electricity sector and a 2.1 percent contraction in trade and accommodation.

Manufacturing now accounts for only 13 percent of the country’s economy, down from around 25 percent two decades ago.

The National Treasury expects the local economy to expand by 0.5 percent this year while the Reserve Bank said it projected an expansion of 0.4 percent during 2016.

KPMG economist Christie Viljoen said: “This implies a growth rate of around 0.7 year on year during the final quarter. However, this could be challenging, considering that the RMB/BER business confidence index declined by four points during the fourth quarter to just 38.”

Last Friday, S&P Global Ratings kept South Africa’s sovereign

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debt score unchanged on the lowest investment level with a negative outlook, but cut the country’s local debt rating to match the sovereign.

S&P said that it expected to see GDP growth of 1.4 percent next year.

“The rating agency warned on December 2 that it could downgrade the South African sovereign’s rating to non-investment grade if economic growth does not improve in line with its current expectations. Other risk factors include a slower narrowing in the fiscal budget deficit or a decline in GDP per capita levels in US dollar terms, that is due to weak growth and/or a shock to the exchange rate,” said Viljoen.

GDP increase in third quarter, shy of 0.5% estimates