GDP likely to show slight growth

Finance Minister Pravin Gordhan.

Economists are expecting a slight improvement in South Africa’s gross domestic product (GDP) figures expected to be released on Tuesday.

The country’s GDP growth slowed to 1.3% in the second quarter reflecting a marked decline from 4.5% in the first quarter.

However, there seems to be consensus that the third quarter GDP growth will come in at around 1.8%.

Economists attribute this to stronger retail activity, and manufacturing which benefited from a weaker rand.

Brait economist Colen Garrow said it was unlikely the economy would have grown significantly more than the seasonally adjusted rate of 1.3% in the second quarter.

However, he was hopeful the weakness in the rand exchange rate would come to the rescue of beleaguered supply sectors.

“While mining remains in recession, growth in manufacturing seems to have perked up in response to the weakness in the exchange rate. This will slightly boost total output in the third quarter,” said Garrow.

He said the retail sector, which grew by 8.3% in September, would also give a boost to the third quarter figures.

Investec Group economist Annabel Bishop said recent SA Reserve Bank indicators showed the GDP outlook was unlikely to be particularly strong.

She said that a slight improvement of 1.8% growth was expected. However, Bishop said the figures could surprise as there may have been a greater than anticipated impact from strike actions in the second quarter.

She said the risk was that the global downturn would damage SA’s external trade prospects earlier than expected.

Manqoba Madinane, economist at Econometrix, said he expected only a slight improvement in the GDP.

He attributed this to the fact that manufacturing output had improved significantly compared to the second quarter.

Dawie Roodt, chief economist at Efficiency Group, said while he too was expecting a better quarter compared to the second one, the most worrying factor was that the economy was not performing well.

“A couple of things will change, but there is not much to be optimistic about,” he warned.

On Friday, Finance Minister Pravin Gordhan expressed concern about the weaker economic growth in Europe.

He said the euro zone bought one third of SA’s manufactured exports and that the present global economic turmoil was undermining recovery.

Gordhan said he had lowered government’s growth forecast to 3.4% in 2012. This was less than half the 7% needed to slash the 25% unemployment rate to 14% by 2020.

Tshepo Mokoka, a researcher at the Wits school of economic and business sciences, said retail sales in the country had been on an upward trend since 2009 and this had added positively to the GDP.

He said the biggest challenge facing the country’s economy at the moment was the euro zone crisis which was contributing to low levels of investment.

Mokoka said although he expected some improvement in the third quarter GDP, the economy would still suffer from low growth as there had been no massive investments into the economy.