According to data from Statistics South Africa, the country’s GDP decreased by 1.3% in the fourth quarter of 2022. (Waldo Swiegers/Bloomberg via Getty Images)
After a surprisingly buoyant rebound in the third quarter, South Africa’s economy recorded a deeper-than-expected contraction in the last three months of 2022.
According to data from Statistics South Africa, the country’s GDP decreased by 1.3% in the fourth quarter of 2022, putting the size of the economy back below its levels before the Covid-19 pandemic. Analysts were expecting a smaller 0.4% contraction during the quarter, which saw the country’s economy endure higher stages of electricity load-shedding.
All major economic sectors shrunk during the quarter, including mining, manufacturing, finance and retail.
The data adds to an already bleak picture of South Africa’s economic growth going into 2023.
In January, the South African Reserve Bank gave a dire prognosis of the health of the country’s energy crisis-hit economy, forecasting GDP growth of just 0.3% in 2023. The bank estimated that load-shedding could shave as much as two percentage points from growth this year.
The Reserve Bank’s medium-term expectations weren’t much better, with the economy forecast to expand by 0.7% in 2024 (down from 1.4%) and by 1% in 2025 (down from 1.5%).
The treasury was slightly more bullish on growth, forecasting in the budget that GDP would expand by a still-meagre 1.4% over the medium term. According to the treasury’s forecasts, South Africa’s economy is expected to grow by 0.9% 2023 and will recover slowly to 1.8% by 2025.
“This rate of economic expansion,” the budget noted, “is well below the pace required to generate significant employment growth and support national development.”
Ratings agencies have identified South Africa’s low growth potential as a key credit weakness, hamstringing the country’s efforts to claw back its investment grade rating.
Responding to South Africa’s budget, delivered by Finance Minister Enoch Godongwana last month, Aurélien Mali, the vice president senior credit officer at Moody’s, said: “The failing electricity sector, with record levels of load-shedding, are likely to lead to lower growth this year and next than the government currently forecasts.”