Stats SA: GDP growth below peak

South Africa’s 0.4% gross domestic product (GDP) growth in the first quarter (Q1) of 2023 is nothing to be excited about.

This is according to experts, who said the “flat growth” doesn’t reflect in much-needed areas like employment but rather reveals an economy in deep distress.

Statistician-General Risenga Maluleke announced the growth yesterday, noting that the manufacturing and finance industries were major drivers of growth on the supply side of the economy.

Maluleke said despite the 0.4% rise in the first quarter of 2023, which grew by 0.2% compared to the first quarter of 2022, GDP remained below the peak reached in Q3: 2022.

Uemployment

However, following revelations by both the International Monetary Fund (IMF) and South African Survey, published by the Institute of Race Relations, SA was facing mounting economic and social challenges, economic and political analyst Daniel Silke said issues such as unemployment would remain acute.

According to Silke, SA needed a growth between three to five percent in order to kick-start economic participation and job growth within the country.

“Although we are barely growing, we are not contracting as an economy, but ultimately at this kind of very low growth rate, all of the existing problems in the economy will remain unresolved and certainly on the issue of job creation, we are going to make absolutely no progress at all,” he said.

“One can only hope if the energy situation does show some signs of relief, which according to the minister of electricity it may do over the next few months or so, then we will see a little bit of oxygen breathing into the economy.

However, Silke added, that depends, “certainly initially”, on the energy crisis.

“But the only good thing is the country is not yet formally in a recession North-West University Business School economist Prof Raymond Parsons said economic growth has become highly volatile in recent quarters, with the growth outlook for 2023 remaining weak, with most forecasts converging around 0.2%-0.3% for the year as a whole.

“An elevated level of uncertainty, therefore, still prevails about SA’s economic outlook and direction due to a number of these recent well-known negative factors affecting the country’s performance,” he said.

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Geopolitical tensions

“And geopolitical tensions emerging in Q2: 2023 as a result of SA’s controversial stance on the Russia-Ukraine conflict, have also imposed a higher risk premium on SA and have already negatively affected investment sentiment in the current quarter.”

Parsons said the Absa Purchasing Managers’ Index for May (on 1 June) not only revealed the downbeat assessment of the environment but that respondents were notably more negative about business conditions in the near future, while Nedbank warned that the aggressive rise in interest rates will worsen the financial strain on households, dampening demand for credit and ultimately triggering another wave of job losses. Based on the economic wrap-up for May.

SA’s unemployment rate increased slightly in Q1, with the number of unemployed people increasing by an estimated 179 000 individuals, while the number of employed climbed by 258 000.

ALSO READ: Stats SA: GDP increases by 1.6% in third quarter of 2022

– reitumetsem@citizen.co.za