Tag: GDP

By Mfuneko Toyana for Reuters

Africa’s most industrialised nation has been hit hard by the COVID-19 pandemic, recording the seventh-largest number of cases worldwide, although it has seen fewer deaths than some other badly affected countries.

Analysts polled by Reuters had predicted a 47.3% contraction because of the lockdown restrictions, which were among the harshest in the world.

“This is the first time in history that the South African economy has contracted for four straight quarters,” Statistician-General Risenga Maluleke told a news conference.

The rand fell roughly 1% against the dollar on the dismal data to trade at 16.9325 per dollar.

Joe de Beer, another top official at Statistics South Africa, said that after adjusting for inflation the economy was roughly the same size in the April-June quarter as in the first quarter of 2007.

Most sectors declined steeply except for agriculture, which grew 15.1% in the second quarter from January-March, helped by fruit and nut exports, and better-than-average winter rainfall.

Mining declined 73.1%, manufacturing 74.9% and construction 76.6%. Gross domestic product (GDP) for the whole economy shrank 17.1% from the same period in 2019.

Jeff Schultz, economist at BNP Paribas, said the global impact of the pandemic coupled with the recent return of power cuts by ailing state utility Eskom would hamper any economic recovery.

“It will take a very long time to get to pre-pandemic levels,” he said.

The government expects a GDP decline of at least 7% in 2020, a worrying prediction in a country where unemployment was at around 30% before COVID-19.

Pamela Mutandwa, 37, who runs a roadside vegetable stand in Pretoria, said times were hard. “It was really difficult during lockdown. There were no people buying and I struggled. When I opened in 2009 there were more customers.”

Tlouama Abrama, 31, a petrol attendant, said he was disappointed by the government’s economic policies. “They should be doing more to revive the factories around here so people can get jobs. Their policies are not working.”

SA’s GDP nosedives

The South African economy has suffered its worst quarterly GDP performance in 10 years, dropping by 3.2%.

The downturn has been caused by, among others:

– The failure of state-owned enterprises, such as Eskom and SAA
– A slump in manufacturing
– A major downturn in secondary industries, especially construction
– Year-on-year GDP growth of 0% – meaning the economy is stagnating
– Agriculture lost 13% of its output in the first three months of the year
– A decline in household spending: despite spending more on alcohol, food and restaurants, consumers have avoided buying new clothes (down 12.7%) and skimped on transport costs (down 3.1%)

SA blackouts may cut growth close to zero

By Rene Vollgraaff and Londell Phumi Ramalepe for Bloomberg/Fin24

South Africa’s power cuts could bring economic growth for the year close to zero if they continue at the same severity seen in March, the central bank said.

The wave of rolling blackouts that started in November and are among the worst the country has yet experienced could knock 1.1 percentage point off economic growth, the Reserve Bank said in its Monetary Policy Review released Wednesday in Pretoria, the capital.

Expansion of close to zero would be the worst outcome since 2009, when former President Jacob Zuma came to power.

The nation’s embattled power utility, Eskom, implemented so-called stage 4 load-shedding, which removed about 10% from the grid, last month as ageing plants were offline. The company is battling with high debt levels and declining revenue after years of financial mismanagement. It was at the center of alleged looting under the previous administration that’s referred to locally as state capture.

“It has become clearer, however, that the legacy of state capture of which load shedding is one symptom will constrain growth for a longer period,” the Reserve Bank said. “The damage done by state capture is worse than previously understood.”

The country’s economy went through a recession last year and hasn’t expanded at more than 2% annually since 2013. Growth will only pick up once domestic constraints are dealt with, Deputy Governor Kuben Naidoo said in a presentation after the release of the Monetary Policy Review. Gross domestic product increased 0.8% in 2018.

The central bank pointed out that its estimates, which also show 125 000 jobs could be lost, assume load shedding will persist at high levels throughout the year, and don’t incorporate longer-term costs such as forfeited investment.

“It’s unclear to what extent firms and household have now made their own plans to manage or avoid their reliance on Eskom, which could mitigate growth costs,” the Reserve Bank said.

Shock as GDP shrinks by 2.2%

By Karl Gernetzky for Business Live

SA’s economy shrank by a shock 2.2% in the first quarter of 2018 compared with the final quarter of last year – with the surprisingly poor performance due to a plunge in the agricultural sector of 24.7%.

This is the largest quarterly fall since the second quarter of 2009. Economists had expected a contraction of 0.5% quarter on quarter.

The rand reacted immediately and dramatically, weakening by about 10c against the dollar shortly after 11.30, to about R12.65.

SA’s gross domestic product (GDP) grew 0.8% compared with the same quarter in 2017, well below a Trading Economics consensus forecast of 1.9%.

Mining fell 9.9%, manufacturing 6.4% and construction 1.9%, Statistics SA said on Tuesday.

The decline in the manufacturing sector was largely due to the petrochemicals and metals subsectors.

Government services grew 1.8% and financial services 1.1%.

Government services had been bolstered by activities conducted by the Independent Electoral Commission in the first quarter, statistician general Risenga Maluleke.

Economists had expected mining and manufacturing to weigh on first-quarter GDP performance due to, among other factors, a stronger rand and investors’ continued caution, despite improved sentiment since Cyril Ramaphosa became president of SA.

Uncertainty over black economic empowerment policy and mine stoppages were cited as additional actors that held back mining.

Agriculture was the wildcard expected to lift the overall figure, as SA continues to recover from drought conditions.

“In consumption-driven economies like SA, it is not unusual for a weak first-quarter GDP print given the high base set in the final quarter of the previous year,” said FNB chief economist Mamello Matikinca.

Outlook

Analysts expect consumers to be hard pressed for the rest of 2018, as the effect of April’s tax hikes and increased fuel costs seep into the market.

Broad consensus among analysts was that growth would accelerate towards 2%, amid improved global economic conditions and due to positive sentiment emanating from SA’s escape from full junk status.

“For the year as a whole, however, we expect growth to pick up from the second quarter and accelerate in 2018 to 1.9% year on year from 1.3% year on year in 2017 as cyclical factors linked to higher sentiment levels, improved private sector investment and the impetus from global demand increasingly take effect,” said Investec economist Lara Hodes.

South Africa enters a recession

Gross domestic product contracted 0.7% for the first quarter of 2017, indicating that the country has entered into a recession, according to deputy director general of Economic Statistics at Statistics South Africa (Stats SA) Joe de Beer.

The latest GDP data was released by Stats SA on Tuesday.

For South Africans, this means:

  • The value of the rand is weaker, driving the price of commodities and imports up

  • Food and petrol prices are likely to increase

  • Foreign investment will slow

  • Local job creation will slow

  • The unemployment rate will continue to rise as companies contract and lay people off

The contraction follows the GDP decline of 0.3% in the fourth quarter of 2016. In 2016, the economy grew only 0.3% for the year.

Compared to the previous year, GDP growth came to 1%. “Over the last four years there were instances of negative economic growth prior to the last two quarters,” said De Beer.

The main contributors to the contraction were the trade and manufacturing industries. Trade declined 5.9% and manufacturing contracted 3.7%.

The agriculture and mining industries were the only sectors which made positive contributions. Agriculture increased growth by 22.2% on the back of the drought recovery, and mining grew by 12.8%.

However, expenditure on GDP contracted by 0.8% in the first quarter.

Household consumption declined 2.3%, with spend of food and non-alcoholic beverages, clothing and footware and transport the major contributors to negative growth.

Gross fixed capital formation grew by 1%, mainly due to machinery and equipment which grew by 7.9%.

Net exports contributed negatively to growth and expenditure on GDP, while goods and services contributed negatively to growth in exports. Exports of mineral products and vehicles and transport equipment were largely responsible for the decrease in goods, according to Stats SA.

Imports, which increased 3.2%, were driven by imports of mineral products.

Government consumption expenditure contracted 1%.

Recently the World Bank projected low growth for the following two years. The World Bank expects growth of 0.6% for 2017, 1.1% for 2018 and 2% for 2019. The projections for 2017 and 2018 are 0.5 and 0.7 percentage points less respectively than its January 2017 figures, Fin24 reported. data

The Reserve Bank also revised down growth forecasts. At the monetary policy committee rates announcement in May, Reserve Bank governor Lesetja Kganyago said political tensions and the sovereign downgrades to junk status have presented risks to growth.

The Reserve Bank’s growth forecast for 2017 is now 1%, down from 1.2%. Growth projections for 2018 were cut down from 1.7% to 1.5%. Similarly, the 2% growth forecast for 2019 was revised to 1.7%.

At its recent credit review, ratings agency Standard and Poor’s (S&P) emphasised that low growth remained a concern. S&P explained political risks would weigh heavily on growth priorities and this would slow fiscal consolidation.

“We believe the current political environment could result in the private sector delaying business investment decisions, thereby restraining GDP growth,” said S&P.

S&P projects growth to rebound to 1% in 2017 and average at 1.5% between 2017 and 2020.

By Lameez Omarjeev for News24

The country’s gross domestic product contracted 0.3% in the fourth quarter of 2016, according to Statistics South Africa (Stats SA).

Stats SA released the data in Pretoria on Tuesday. Overall GDP grew by 0.3% in 2016. This is lower than growth of 1.3% reported in 2015.

The main contributors to negative GDP growth were the mining and quarrying industry and the manufacturing industry.

Commodities showed a declining trend, according to Michael Manamela, chief director of national accounts. Mining and quarrying decreased by 11.5% due to a drop in the production of coal, gold and other metals including platinum.

Manufacturing decreased by 3.1%. This was brought on by a decline in manufacturing of food and beverages, petroleum, chemical products, rubber and plastic products as well as motor vehicles, parts and accessories of transport equipment.

Agriculture declined by 0.1% but although negative, it showed signs of improvement, said Manamela. “What is important is that the trajectory is upward and we should see an improvement in 2017.”

The primary and secondary sectors declined by 9% and 1.8%, respectively.

The tertiary sector grew by 1.3%. The largest contributors to GDP include trade, catering and accommodation industry and finance, real estate and business services.

Expenditure on GDP

Expenditure on GDP decreased by 0.1%, and overall expenditure lifted 0.5% in 2016. This is lower than the expenditure of 1.2% reported in 2015.

Household final consumption expenditure increased by 2.2% in the fourth quarter. It contributed 1.3 percentage points to total growth. The largest contributors to growth include food and non-alcoholic beverages which went up 2.4%, and clothing and footware which rose 10.4%.

Growth in semi-durable goods grew 6.8%, followed by services at 3.2% and non-durable goods at 0.3%. Durable good spend only increased by 0.2%.

Government final consumption expenditure increased 0.3%.

Growth in investment expenditure increased by 1.7%. The largest contributor to growth was construction works, which increased 3.6% and contributed 1.2 percentage points to growth.

Net exports contributed positively to growth in expenditure, said the report. Exports increased by 12.5%, due to higher exports of precious metals and mineral products. Imports increased by 6.1%.

Fin24 previously reported that economists were expecting low growth in the fourth quarter. South Africa’s GDP growth rate on a yearly basis until the end of September 2016 was at 0.7%, which was impacted by a 0.1% contraction in the first quarter of 2016 and low growth in the following quarters.

South Africa’s GDP growth rate on a yearly basis until the end of September 2016 was at 0.7%, which was impacted by a 0.1% contraction in the first quarter of 2016 and low growth in the following quarters.

Further, the Business Confidence Index declined to 38 in the fourth quarter of 2016 from 42 in the previous period, explained Giacomo Bonavera, head of foreign exchange trading at Capilis Asset Managers, who wrote in Finweek on Monday.

“An increase in activity in the finance, transport and communication, real estate and construction sectors was offset by a decline in the agriculture, mining and manufacturing industries,” he said.

National Treasury said in its budget in 2017 that it expected the country to grow by 1.3% in 2017, and by 2% in 2018. It also sees inflation falling to 6.4% in 2017 and 5.7% in 2018.

By Lameez Omarjee for Fin24

SA’s growth forecast slashed

The International Monetary Fund (IMF) has left SA’s 2016 economic growth forecast unchanged but cut the outlook for 2017, citing the effects of lower commodity prices, high unemployment and policy uncertainty on the economy.

SA’s economic outlook was “clouded by policy uncertainty and political risks,” the global lender said in its World Economic Outlook report released on Tuesday. The document gives an update on global economic developments and projections for world growth.

It left the 2016 growth forecast for SA at 0.1% but lowered that for 2017 to 0.8% from the 1% it projected just two months ago.

The country’s growth and employment could be boosted by the implementation of a comprehensive structural reform package that fostered greater product market competition, more inclusive labour market policies and industrial relations, and improved education and training, as well as reduced infrastructure gaps, the IMF said.

“Measures to improve state-owned enterprises’ efficiency and governance, including through greater private participation, are a particularly important element of the needed reform package to lift growth prospects and reduce contingent fiscal risks,” the fund said.

While some of these reforms might take time to yield positive growth effects, in the short term, they could improve confidence and signal policy consistency, it said.

The Reserve Bank said in its monetary policy review, released on Monday, that growth would increase on an improvement in global growth, higher net exports on a competitive rand, a recovery in investment, and a modest improvement in household spending in coming years.

Restoring growth rates to historical averages required deeper structural reforms without which the economy was expected to expand at rates between 1% and 2% for the foreseeable future, “generating little or no improvement in employment or individual living standards,” the Reserve Bank said.

The Bank expects economic growth at “lacklustre” rates of 0.4% in 2016, 1.2% in 2017 and 1.6% in 2018. The Bank’s outlook for 2016 was recently slightly upwardly revised following higher than expected growth in the second quarter.

The IMF cut sub-Saharan Africa’s 2016 economic growth forecast to 1.4% from 1.6% previously, and for 2017 to 2.9% from 3.3% earlier. It has not changed its projections for world economic growth and still expects it to advance 3.1% in 2016 and 3.4% in 2017.

By Ntakisi Maswanganyi for www.bdlive.co.za

South Africa has staved off a technical recession as Statistics SA announced on Tuesday that the economy grew by 3.3% quarter-on-quarter in the second quarter of 2016.

This was better than the expected 2.8% expansion and following the 1.2% contraction in the previous quarter.

The South African data in the past couple of months has been fairly decent, and this was certainly reflected in the GDP number, says TreasuryOne.

“We are still a miles away from where we want to be, but there is some light on the horizon.”

“This is good news all round as a technical recession was avoided. The Easter weekend falling in March no doubt helped the second quarter and we may actually get positive growth this year,” economist Mike Schüssler told Fin24.

The year-on-year growth was 0.6%.

Mike de Beer, who announced the growth stats on behalf of Statistician General Pali Lehohla, says for the first time in a long while there was a positive growth rate in all three the large sectors. The primary sector showed a growth rate of 8.8%, with mining up by 11.8% and agriculture down 0.8%.

The secondary sector grew by 5.3% with manufacturing up 8.15%, construction up by 0.1% and electricity down by 1.8%. There were notable increases in the petroleum and motor vehicle manufacturing divisions.

The tertiary sectors showed a growth rate of 2%, with finance up 2.9%, transport up 2.9%, trade up 1.4%, government up 1.2% and personal services up 0.8%.

He indicated that manufacturing, mining and quarrying made the biggest contribution to GDP growth. Manufacturing increased by 8.1%, largely due to higher production in petroleum and chemical products, rubber and plastic products and motor vehicles, parts and accessories and other transport equipment.
CHART: SA economy rebounds as political risks loom
There was flat growth from the rest of the economic sectors, like construction, for instance, says De Beer.

Nominal GDP is estimated at just more than R1trn. The finance sector is the biggest contributor followed by government, trade and manufacturing. About R1 in R5 comes from the financial sector.

Real expenditure on GDP increased by 3.4% in the second quarter on a q/q basis. It was mostly export driven. Government consumption expenditure increased by 1.3%. There were declines in gross fixed capital formation and imports of goods and services.

Household final consumption expenditure increased by 1% q/q. The strongest growth came from miscellaneous goods and services (8.9%). The growth in consumption expenditure was mostly on the services side.

Government final consumption expenditure increased by 1.3% q/q and gross fixed capital formation decreased by 4.6% q/q. Construction works declined by 14.4% and machinery and other equipment by 13%.

Exports increased by just over 18% in the second quarter, while imports decreased by 5.1% q/q.

De Beer says the growth rate tells the same story as the last 3 or 4 years in terms of GDP growth.

“Yes, it is good news, but – and this is the big problem – the economy is already far weaker in the third quarter and we need to also understand that with a population growth at 1.7% we are growing far slower than that on a year-on-year basis,” says Schüssler.

He says that means the average South African is still poorer than a year ago or even three years ago.

“That is the real problem: we are not keeping pace with our population growth,” he cautions.

By Carin Smith for News24

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