Economists expect some good news today – but ‘high uncertainty’ lingers
Economists anticipate positive data for GDP growth in Q1, steering South Africa away from a technical recession.
Stats SA will publish the latest GDP figures on Tuesday (6 June) at 11h30, with markets watching out for any shocks that might be coming.
Expectations around the GDP figure are varied, and range from a decline of 0.6% – which would put the country into a technical recession and throw up red flags for a full year recession – to growth 0.6%.
GDP data for the fourth quarter of 2022 surprised on the downside earlier this year, showing a quarterly decline almost twice as big as anticipated at -1.3% versus expectations of -0.6%.
At the time, South Africa had experienced its worst quarter of load shedding ever, while several other shocks to the economy – including the fallout of a major strike at the country’s ports – fed through the data.
For the Q1 data, while load shedding has been even worse than Q4 2022, the other economic shocks haven’t been present, economists at the Bureau for Economic Research (BER) said. Hence, the country is likely to post growth, albeit very marginal.
“Besides load-shedding, the Transnet strike, a derailment on the export coal line and an outsized decline in value added by the financial sector contributed to a real GDP contraction in 2022Q4.
“While load-shedding was even more severe in 2023Q1, the other major constraints on GDP in Q4 did not repeat,” the BER said.
“Furthermore, the available high-frequency monthly Stats SA data does not support another GDP decline in Q1. Against this backdrop, we expect that real GDP increased by 0.6% q-o-q (0.3% y-o-y after seasonal adjustments) in 2023Q1. This is somewhat higher than the Bloomberg consensus of 0.3% q-o-q.”
However, even with some GDP growth, it is unlikely to show a recovery from the decline in Q4 2022, the economists said.
Economists at Absa and Nedbank echoed these sentiments, expecting South Africa to narrowly avoid a technical recession.
“We forecast real GDP growth of 0.2% q-o-q sa for the quarter,” Absa said.
Absa said that activity data in the first quarter of the year show that various parts of the economy were quite resilient in Q1, even as rotational power cuts worsened.
“In fact, the final iteration of our high-frequency data-based GDP tracking estimate points to GDP growth of 0.8% q-o-q sa for Q1 23, suggesting some upside risk to our baseline forecast.
“That said, given the volatility in high-frequency activity data and the fact that large parts of the economy have no intra-quarter activity data, uncertainty around our forecast is high,” the bank said.
Nedbank, which was one of the more bearish forecasts for GDP in Q1 has also swung around to projecting growth.
“Following a sharp contraction in Q4 2022, the economy is expected to have performed slightly better in Q1 2023 despite acute load-shedding,” it said.
“On the production side, the boost came from higher production by agriculture, mining, manufacturing, transport, and communications. On the expenditure side, consumer spending and fixed investment probably increased marginally, helping to contain the impact of a further deterioration in the country’s net export position.”
Nedbank said that real GDP is forecast to have increased by about 0.3% q-o-q in Q1 after shrinking by 1.3% in Q4, however, it warned that this resilience will fade as the year progresses, load-shedding continues, other logistical constraints persist, and sharply higher interest rates weigh down on companies and households.
Read: South Africa’s GDP is not telling the whole story: analysts
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