South Africa\u2019s economy likely grew more than 2% in the first quarter, beating economists\u2019 forecasts, an index with a strong correlation to gross domestic product shows.<\/p>\n
The BankservAfrica Economic Transactions Index, which measures EFT-originated transactions, increased 2.4% in the first quarter. That suggests growth may have exceeded 2% in the three months through March, said Mike Schussler, chief economist at Economists.co.za, which helped develop the index.<\/p>\n
A median estimate of 23 economists in a Bloomberg survey was for an expansion of 1.8%.<\/p>\n
Better-than-expected economic growth would boost tax revenue, helping to rein in government debt and narrow the budget deficit at a faster rate.<\/p>\n
Debt is set to peak at 75% of GDP in 2024-25 before falling back to about 70% by the end of the decade and the deficit is forecast at 4.2% of GDP in 2024-25, according to Treasury estimates. Beating those estimates would bolster the attractiveness of local assets to offshore investors.<\/p>\n
On a monthly basis, the index rose to a record 135.9 from a revised 134 in February, fueled by a surge in metal commodity prices due to Russia\u2019s invasion of Ukraine. South Africa is the world\u2019s top producer of platinum and rhodium and the second-largest miner of palladium after Russia.<\/p>\n
\u201cThe local economy has been given a boost by the high commodity prices and large-scale government spending, as some confidence seemingly returns for businesses and consumers,\u201d said Schussler.<\/p>\n
Still, while higher metal commodity prices have been a boon for first-quarter economic growth, the spike in fuel and food costs that are also being stoked by the war are likely to weigh on output in coming months., Schussler said.<\/p>\n
That\u2019s as inflation breaches the upper band of the central bank\u2019s 3% to 6% target, hurting consumers, he said.<\/p>\n