The decline in the third quarter gross domestic product (GDP) growth to -0,2% from 0,5% in the second quarter of 2023 was worse than expected.
Stats South Africa released the GDP growth figures for the third quarter on 5 December. Prof Raymond Parsons, economist from the North-West University (NWU) Business School, says negative factors have clearly dominated the positive ones to a greater extent than anticipated in that period.
“Although there was a temporary improvement in energy availability in that quarter, several other key high-frequency indices at the time already warned of a loss of economic momentum. Five out of ten sectors of the economy have now shown a decline in the third quarter GDP growth.”
According to Prof Parsons, similar economic trends will probably also prevail in shaping a likely weak GDP growth outcome in the current fourth quarter of 2023.
He says the decline in fixed capital formation in the third quarter of 2023 is also a red flag.
“The year is likely to end with muted economic activity. South Africa must now avert the possibility of a ‘technical recession’ (two consecutive quarters of negative growth) developing against the poor economic background of the third quarter of 2023.”
Prof Parsons points out that, apart from other global and domestic headwinds, growth expectations in South Africa remain heavily dependent on, in particular, load-shedding being steadily phased out and a higher level of energy security being achieved than seems to be the case at present.
“Furthermore, there are now also bottlenecks in Transnet’s rail and port services that are imposing widespread disruption and heavy additional costs on the economy. These cumulative infrastructural setbacks require urgent remedies – such as the recent Transnet loan guarantee by the National Treasury – to be successfully implemented to sustain South Africa’s growth performance next year.”
Prof Parsons concludes that the latest GDP growth figures inject new urgency into the policy and project actions needed to underpin economic growth.