/ 25 November 2008

‘SA in for period of much slower growth’

South Africa’s economic growth rate slowed to 0,2% in the third quarter of 2008 on a seasonally adjusted and annualised basis, compared with an upwardly revised 5,1% growth in the second quarter, official data showed on Tuesday.

The third quarter figure was the lowest in a decade.

A Reuters poll of economists last week forecast the economy growing by an annualised 0,3% in the third quarter.

On an unadjusted basis, South Africa’s economy grew by 2,9% compared with the third quarter of 2007.

George Glynos, a market analyst at ETM, said the forecast was in line with his expectations.

”I know this has been part of the driver of the change in interest rate expectations and that the expectations have shifted to favour a cut in December.

”But we should see a recovery in the fourth quarter. So we remain comfortable with a cut in the new year rather than in December.”

Economist at Efficient Group Dorest Els said the figure was worse than he had expected.

”It is evident that the economy is under significant strain. The economic driver, from the expenditure side, is the consumer, and it shows that consumers have been under a lot of strain and so has business confidence.

”It signals that we are in for a period of significantly slower growth, and we could perhaps see a quarter of negative growth.”

”It’s a very weak positive,” said Nedbank economist Nicky Weimar.

”There were no surprises, the only surprise is that the figure wasn’t lower than it is. It was held up by construction and agriculture. The key factor there is the growth in finance – had that been lower, we would have seen a negative figure.”

Kgotso Radira, an economist at Investec, commented: ”Today’s outcome is significantly lower than market expectations and shows that the economy is slowing at a more rapid pace than previously thought.

”The underlying trend of the production side of the economy shows that the slowdown is broad-based across most sectors.

”In 2008 we expect GDP growth to average around 3% [if not slightly lower] and fall sharply in 2009 before recovering in early 2010.

”We continue to believe interest rates will remain unchanged for the remainder of the year and expect the first interest rate cut of 50 basis points in April 2009.

”However, the rapidly slowing real economy might support an early cut in interest rates.” – Reuters, I-Net Bridge