SA economy avoids technical recession, grows 0.4%

After contracting 1.1% in the last quarter of 2022, South Africa’s economy has grown slightly, putting the country’s GDP marginally higher than its pre-pandemic level.

According to data released by Statistics South Africa on Tuesday, GDP grew 0.4% quarter-on-quarter during the first three months of 2023. This was despite severe load-shedding posing a considerable threat to the economy, which analysts expect will grow less than 1% this year as a result.

Eight of the 10 industries recorded growth in the first quarter of the year, the data showed, although none expanded by more than 1.5%. Growth in the quarter was driven by manufacturing (1.5%), transport, storage and communication (1.1%) and construction (1.1%). 

South Africa’s largest industry — finance, real estate and business services — grew just 0.6%.

Meanwhile, the sector that contracted the most — agriculture, forestry and fishing — shrunk by quite a margin, falling 12.3% quarter-on-quarter. The decline was primarily caused by decreased economic activity relating to field crops and animal products, according to StatsSA.

Ahead of Tuesday’s release, analysts correctly predicted that the economy would have avoided a technical recession (two consecutive quarters of negative growth) despite considerable headwinds. The first quarter GDP growth was in line with the Thomson Reuters consensus estimates and slightly higher than Bloomberg’s (0.3%). 

Although load-shedding was even more severe in the first quarter of the year, the Bureau for Economic Research (BER) noted, the other major constraints on GDP in the fourth quarter did not repeat. 

The BER was slightly more bullish on the country’s growth than consensus expectation, forecasting a 0.6% expansion. But noted that, even if proven right, 0.6% growth would still mean an incomplete GDP recovery from the contraction recorded at the end of 2022.
Attached to their 0.3% forecast, Nedbank economists warned that the resilience displayed in the first quarter “will fade as the year progresses as load-shedding continues, other logistical constraints persist and sharply higher interest rates weigh down on companies and households”.