Global Courant
Economists expect positive GDP growth figures in the first quarter, keeping South Africa clear of a technical recession.
Stats SA will release the latest GDP figures on Tuesday (June 6) at 11:30 am with markets watching for potential shocks.
Expectations around the GDP figure are mixed, ranging from a 0.6% decline – which would send the country into a technical recession and raise red flags for a full-year recession – to a 0.6% growth %.
GDP data for the fourth quarter of 2022 surprised downside earlier this year, showing a quarterly decline nearly twice as large as expected, falling -1.3% versus the -0.6% forecast.
At the time, South Africa had experienced its worst-ever divestment quarter, while several other shocks to the economy — including the fallout from a major strike at the country’s ports — were fueled by the data.
As for the Q1 data, while the shutdown was even worse than in Q4 2022, the other economic shocks were not present, according to economists at the Bureau of Economic Research (BER). Therefore, the country is likely to show growth, albeit very marginally.
“In addition to the divestment, the Transnet strike, a derailment on the export coal line and an excessive drop in value added by the financial sector contributed to a real GDP contraction in 2022Q4.
“While the load shedding in the first quarter of 2023 was even more severe, the other major constraints on GDP in the fourth quarter did not repeat,” the BER said.
“In addition, the available high-frequency monthly Stats SA data does not support another GDP decline in the first quarter. Against this background, we expect real GDP to have increased by 0.6% qoq (0.3% yoy after seasonal adjustments) in 2023Q1. This is slightly higher than the Bloomberg consensus of 0.3% qoq.”
But even with some GDP growth, it is unlikely to recover from the Q4 2022 decline, the economists said.
Economists at Absa and Nedbank echoed these sentiments, expecting South Africa to narrowly avoid a technical recession.
“We forecast real GDP growth of 0.2% qoq sa for the quarter,” said Absa.
Absa said activity data in the first quarter of the year shows that several parts of the economy were quite resilient in the first quarter, even as the rotational outages worsened.
“In fact, the latest iteration of our high-frequency data-based GDP tracking estimate points to GDP growth of 0.8% qoq sa for Q1 23, suggesting upside risk to our baseline forecast.
That said, given the volatility in high-frequency activity data and the fact that large parts of the economy lack intra-quarter activity data, the uncertainty surrounding our forecast is high.
Nedbank, one of the most bearish Q1 GDP forecasts, has also turned to growth forecasts.
“After a sharp contraction in the fourth quarter of 2022, the economy is expected to have performed slightly better in the first quarter of 2023, despite an acute tax cut,” the report said.
“On the production side, the impetus came from higher production through agriculture, mining, manufacturing, transportation and communications. On the expenditure side, consumer spending and fixed investment probably increased marginally, limiting the impact of a further deterioration in the country’s net export position.”
Nedbank said real GDP is expected to have increased by about 0.3% quarter on quarter in the first quarter, following a 1.3% contraction in the fourth quarter, but warned that this resilience will wear off as the year progresses, the tax divestiture continues, other logistical constraints remain, and sharply higher interest rates weigh on businesses and households.
Read: South Africa’s GDP doesn’t tell the whole story: Analysts
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