South Africa’s real gross domestic product (GDP) in Q2 was better than expected by many economists, with South Africa expected to see some growth in 2023 – even if it is minimal. <\/p>\n\n\n\n
South Africa’s GDP grew by 0.6% in Q2 following a 0.4% rise in Q1, mainly due to lessened load shedding and further resistance to the effects of load shedding from various businesses. <\/p>\n\n\n\n
Gross fixed capital formation was especially noted in the demand side of the economy, with there being a large increase in investments in imported machinery and equipment, especially electricity infrastructure. <\/p>\n\n\n\n
Economists at Absa said that GDP in the first half of the year was stronger than expected but stressed that South Africa’s economy is still incredibly vulnerable to load shedding. <\/p>\n\n\n\n
This is especially the case for small businesses that lack the resources to invest in alternative sources of energy. <\/p>\n\n\n\n
“And the escalation in load shedding this week to Stage 6, for the first time since July, is a clear reminder that the Eskom constraint to growth will likely persist in the near term,” Absa’s economists said. <\/p>\n\n\n\n
Formal sector job growth has also remained stagnant, which will put pressure on consumer pressure for the rest of the year. <\/p>\n\n\n\n
In addition, early Q3 data has been mixed, with the Absa manufacturing PMI remaining below the neutral 50-point level in August and vehicle sales declining sharply in July and August. <\/p>\n\n\n\n
Economists at Nedbank added that logistical constraints continued to increase operating costs and weigh down activity. <\/p>\n\n\n\n
“On top of these familiar woes, cyclical headwinds are intensifying. Advanced countries are battling the most aggressive monetary policy tightening in decades with varying degrees of resilience, while China’s fading economic recovery clouds the outlook for emerging markets,” Nedbank’s economists said. <\/p>\n\n\n\n
The declining demand will keep international commodity prices down, hurting domestic exports. <\/p>\n\n\n\n
The high interest rates in South Africa have also lessened household demand, which has partly outweighed the gain in purchasing power from declining inflation. <\/p>\n\n\n\n
Companies will also be reluctant to expand their operations, resulting in fixed investment growth slowing. However, government spending will increase due to the higher outlay on public sector wages. <\/p>\n\n\n\n