The South African economy is still braced for robust growth in 2006 and the trend could well be sustained and even improved in the next year, says Absa economist Ridle Markus.
Markus adds that the domestic economy will continue to be powered by growth in consumer spending.
“Although the rate of economic expansion declined in the last quarter of 2005, economic activity has remained resilient into 2006 on the back of continued buoyant consumer demand. We project consumption-led real GDP [gross domestic product] growth of 4,1% in 2006 and regained momentum in 2007, when growth could accelerate slightly to 4,5%.”
Markus says growth in the domestic economy slowed down in the last quarter of 2005 because of weak mining- and manufacturing-sector output.
“Much of the decline during the final quarter of 2005, when economic growth was 3,3% quarter-on-quarter annualised, could be attributed to weak mining- and manufacturing-sector output.”
He further added that manufacturing activity during in the first few months of 2006 seems to well be ahead of that of the corresponding months in 2005, though mining output over the same period was down on an annual basis, largely as a result of declining gold output.
Early indications are that the services sector remains healthy and overall economic growth seems to have rebounded slightly in the first quarter of 2006.
The consumption-led growth will be boosted further by favourable conditions conducive to household spending such as increased use of debt financing, the R12-billion tax relief, interest rates that are at their lowest since the early Eighties and real income growth, which is more than 6% year-on-year.