Economists estimate overall economy growth to be moderate at around 0.1 percent in the third quarter.
This is despite a multitude of economic difficulties such as logistical constraints and high interest rates.
Thanda Sithole, Senior Economist at FNB, says because there were lower stages of load shedding implemented in this quarter, this had a positive impact on most sectors that saw some relief.
However, it is expected that growth for this year will be at 0.8 percent, too low to make an impact on job creation and solving other socio-economic challenges. Statistics South Africa will tomorrow release the third quarter Gross Domestic Growth (GDP) numbers.
The country’s power crisis, logistical constraints, weaker global demand and lower international commodity prices continue to hinder production across sectors.
And due to these factors, the economy grapples with growth. At the same time, although inflation has come down meaningfully, the cumulative 475-basis point hike in interest rates continues to strain household finances, weighing on consumer confidence and demand.
Sithole says the slow growth is despite better power supply in this period. The local economy grew by 0.6 percent in the second quarter.
“The growth support that we see or the growth moderation that we see to around 0.1 percent for the third quarter in our view is likely to be underpinned by the financial services sector, which has received some support from a high interest rate environment. However, the cost-of-living pressures that have weighed on consumers or households purchasing power is likely to pose some downside risk from the financial services sector. On the downside, the goods producing sectors of the economy have not done well in the third quarter, particularly mining and manufacturing, they both contracted on quarter basis.”
Investec Chief Economist, Annabel Bishop says the poor performance of Eskom and Transnet continue to hinder economic growth in the country.
“The poor performance of Eskom and Transnet has hindered economic activity in South Africa. The electricity utility has seen increased load shedding and Transnet has seen increased congestions at its ports. Looking forward the South African Reserve Bank is concerned about the fact that inflation is still high in South Africa, it has not come back to the mid-point of the target of 4.5 percent to remain there consistently and as a consequence, interest rate cuts in the near term are not expected to alleviate growth constraints.”
Meanwhile, Nedbank says the economy probably lost significant momentum in the third quarter despite the improvement in energy availability. It also estimates that the overall real GDP will be around 0.1 percent quarter-on-quarter in the same period. Nedbank predicts that despite the improved energy availability factor in the third quarter, the underlying energy problem remains unresolved and expect this trend to persist and possibly intensify throughout December as planned maintenance resumes, temperatures rise, and large smelters ramp up capacity.
The bank expects growth of another 0.1 percent in the fourth quarter, limiting real GDP growth to 0.7 percent in 2023, down from 1.9 percent in 2022.
