Global Courant
South Africa’s gross domestic product (GDP) rose by 0.4% in the first quarter of 2023, narrowly avoiding a technical recession.
The number was in line with market expectations and came after the country posted a shocking 1.3% decline in the fourth quarter of 2022 due to ongoing tax breakdowns and other issues in critical sectors.
Overall growth was driven by several sectors, which showed higher productivity during the quarter despite continued load outages and an ongoing power crisis.
The manufacturing industry grew by 1.5% in the first quarter, contributing 0.2 percentage point to GDP growth.
Four of the ten manufacturing divisions reported positive growth figures in the first quarter.
The food and beverage division was the largest contributor to the increase in the first quarter. The petroleum, chemical products, rubber and plastic products division also made an important contribution to the growth in this industry.
The financial sector, real estate and business services grew by 0.6% in the first quarter, contributing 0.2 percentage point to GDP growth. More economic activity was reported for financial intermediation, insurance and pension funds, real estate and business services.
The personal services sector grew by 0.8% in the first quarter, contributing 0.1 percentage point to GDP growth. Increased economic activity was reported for community services.
The transport, storage and communications industry grew by 1.1%, contributing 0.1 percentage point to GDP growth. More economic activities were reported for land transport, air transport, transport support services and communication services.
Trade, hotels and restaurants and accommodation grew by 0.7% in the first quarter, contributing 0.1 percentage point to GDP growth. More economic activity was reported in the wholesale, retail and hospitality and accommodation sectors.
Despite the positive turn for the economy, analysts and pundits have warned that the country’s woes are far from over.
As burden easing remains an ever-present scourge for the economy, growth will remain under severe pressure for the rest of the year – especially during the winter months (Q2 and Q3) – and annual growth is expected to be flat.
The South African Reserve Bank has warned that shedding the tax will wipe out two percentage points of GDP growth in 2023, with most forecasting between recession and 0.3% growth.
Expenditure on GDP
Spending relative to real GDP also increased by 0.4% in the first quarter of 2023, indicating higher consumer spending over the three-month period.
Household final consumption expenditure (HFCE) rose by 0.4% in the first quarter, contributing 0.3 percentage point to total growth. Increases were reported for semi-durable and non-durable goods.
The main positive contributors to the increase in HFCE were spending on restaurants and hotels (6.9% and 0.3 percentage points), health (2.6% and 0.2 percentage points), food and non-alcoholic beverages (1. 0% and contributing 0.1 percentage point), transportation (0.9% and contributing 0.1 percentage point), and clothing and footwear (2.3% and contributing 0.1 percentage point).
Spending on the ‘other’ category contributed negatively to the growth of HFCE in the first quarter.
Government consumer spending rose 1.2% in the first quarter, mainly driven by increases in goods and services and employee compensation.
Total gross fixed capital formation increased by 1.4% in the first quarter. The main positive contributors to the increase were other assets (10.3% and contributed 1.0 percentage point), machinery and equipment (1.3% and contributed 0.5 percentage point), non-residential buildings (4.6 % and contributed 0.2 percentage point ) and residential buildings (contributing 1.5% and 0.2 percentage point).
There was an inventory build-up of R35 billion in the first quarter of 2023 (seasonally adjusted and annualised). Large increases in three industries, namely mining and quarrying, trade, hospitality and lodging, and personal services, contributed to stockpiling.
Net exports made a negative contribution to GDP expenditure growth in the first quarter. Exports of goods and services increased by 4.1%, largely driven by increased trade in base metals and base metal items; vegetable products; ready-to-eat foods, beverages and tobacco; and machinery and electrical equipment.
Imports of goods and services increased by 4.4%, largely driven by increased trade in machinery and equipment; chemical products; vehicles and means of transport; and prepared foods, beverages and tobacco.
Read: Economists expect good news today, but ‘great uncertainty’ remains
