/ 6 December 2022

Economy bounces back after second quarter slump

South African Economy As Lockdown Restrictions Ease
South Africa’s economy exceeded expectations in the second quarter of 2023, growing 0.6%. (Waldo Swiegers/Bloomberg via Getty Images)

South Africa’s GDP registered an unexpectedly robust rebound in the third quarter, increasing by 1.6%.

Eight industries recorded positive growth between the second quarter and third quarter of 2022, According to data released by Statistics South Africa on Tuesday.

Growth in agriculture and finance, real estate and business services made the highest contributions to the overall GDP increase, which was far higher than many economists expected. Consensus expectations put the increase at 0.4% in the second quarter, which would mark a modest recovery after the third quarter contraction.

Growth in the third quarter means that the size of the economy is now larger than it was before the Covid-19 pandemic, indicating that its recovery is now firmly back on track.

In the first quarter of 2022, South Africa’s GDP recovered to its pre-pandemic level, expanding by 1.9%. The pandemic’s economic onslaught caused the country’s GDP to contract by a painful 6.4%.

But in the second quarter of 2022 — after two consecutive quarters of upward growth — the country’s GDP shrank again. The 0.7% contraction coincided with the KwaZulu-Natal floods, which severely hit a province that contributes about 16% to the country’s gross domestic product.

A number of economists had expected GDP to rebound modestly in the third quarter, considering economic data was a mixed bag for the period.

Mining and manufacturing output increased over the quarter. So did real income 

from wholesale trade, motor vehicle trade, accommodation and food services. But retail sales declined.

The Bureau for Economic Research (BER) was slightly more bullish on the third quarter growth, forecasting a 0.7% increase. The BER noted that the full re-opening of the economy in late June would have a positive effect on GDP for the quarter, as it was the first three-month period since the end of 2019 without any restrictions on mobility.

Meanwhile, future GDP forecasts are bleak, with economic growth expected to be weighed down by the ongoing energy crisis.

Last month, the South African Reserve Bank’s monetary policy committee (MPC) said it expected the economy to grow by a meagre 0.1% (down from 0.3%). The MPC did, however, also underestimate third quarter growth, with its forecast lining up with consensus.

The MPC forecasts that the economy will expand by 1.1% in 2023 and by 1.4% in 2024, below its previous projections of 1.4% and 1.7% respectively. 
Critics of the Reserve Bank have noted that its repo rate hikes will throw cold water on economic growth. According to StatsSA’s data, household final consumption expenditure decreased by 0.3% in the third quarter of 2022, contributing -0.2 of a percentage point to total growth.