ALAN FINLAY & Reuters, Johannesburg | Monday 12.30pm.
THE South African economy has been more sluggish than thought for the first quarter of the year, largerly due to slumps in the agriculture, forestry and fishing sectors after this year’s high rainfalls and floods.
However low growth means that interest rates are unlikely to be increased in the short-term to offset inflation, analysts said.
Statistics South Africa announced on Monday that the economy grew a mere 0,9% — the lowest figure since the 0,6% recorded in the last three months of 1998.
Although economists predicted a slowdown, some put GDP at 2,7% for the first quarter.
Local markets were buoyed by the figures, which analysts said increase the likelihood of a downward trend in interest rates. They said there is now a need for monetary stimulus to kickstart growth, which higher interest rates will not achieve. They also point to the fact that the data reveals little evidence of demand-led inflation, which could be curbed by higher interest rates.
“The main countervailing factors — off-setting growth or relative stability in other industries — was the sharp drop in agriculture, forestry and fishing due to high rainfalls and floods,” Stats SA head Mark Orkin said in Pretoria.
He pointed out that despite the sluggishness, the 0,9% is the sixth quarterly increase in a row.
This growth is attributed to increased activity in three industries; hotels and restaurants, which grew by 0,5% rise; real estate and business services, which grew by the same amount; and transport and communication, which grew 0,4%.
The central bank, commenting soon after the release, said the lack of demand pressures is good for the inflation outlook. “We think it will have a positive effect on the inflation outlook for the rest of the year,” Johan Prinsloo, the central bank’s senior economist said, adding that the bank is confident for growth for the remainder of the year.
“From an interest-rate perspective, it is positive but from a growth and sentiment point of view it is negative as it shows that the economy is still dead on its feet,” said Noelani King, economist at PSG Investment Bank in Cape Town.
An annual growth rate of 1,2% was recorded last year following a fourth quarter jump of 3,6% in the GDP. This compared to an annual growth rate of 0,6% in 1998.
The GDP in the first three quarters of last year were 1,1%, 2,1% and 3,2% respectively.