On 3 September 2019, the eagerly awaited second quarter GDP data by Statistics South Africa will be released. Quarter 1 of 2019 produced a disappointing quarter-to-quarter economic growth rate of (minus) -3,2%, leading to new concerns of another recession.

Prof Danie Meyer, director of the North-West University’s (NWU’s) Trade and Development (TRADE) entity, says to predict the outcome of the second quarter growth rate is like playing roulette, with so many scenarios and possibilities in an uncertain political and economic environment.

“We analysed the past performance of the economy as well as the components of the factors contributing to the national economy. Are we facing yet another recession? Since 2013, first quarter economic performance has been the weakest, at -0,8% growth on average measured from quarter to quarter, followed by the second and third quarter average growth of 1,2%.”

He says the fourth quarter has delivered the highest growth rates of 2,1% on average. “Historically, and specifically in 2018 and 2017, growth rates in the second quarter were -0,7% and 2,5%, respectively.

“From a Keynesian aggregate demand point of view, the situation in the national economy also does not look very positive. Consumer demand and spending are on a downward trend; domestic investment is still low with a so-called “investment strike” by the private sector, which is still continuing; while strong exports with a positive balance of payment, are the only positive component in the national economy.”

Prof Meyer sites other factors such as lower inflation (down from 4,5% to 4,0% in July), severe declines in manufacturing and mining production output, reductions in value of motor vehicle sales, a decrease in wholesale retail, but an increase in retail trade, and major job losses in most economic sectors, that affect the economic outlook.

The leading indicator index of the SARB also declined month to month by as much as 1,9%. “Taking into account the difficult economic and political environments, overall economic growth in 2019 will be low and predicted to be between 0,5 and 0,8%. The quarter-to-quarter prediction for quarter 2 in 2019 is also very low, but hopefully positive, between 0,1 and 0,5%, and therefore it is anticipated that we could just be saved from a recession. We need to remain positive even in our predictions! Let’s wait for 3 September to analyse the real data …”

Prof Danie Meyer