First-quarter economic growth beats forecasts

Gross domestic product expanded 1.9% in the three months through March, compared with revised growth of 1.4% in the previous quarter.
Image: Bloomberg

South Africa’s economic growth quickened in the first quarter as the country emerged from a fourth wave of coronavirus infections and President Cyril Ramaphosa relaxed almost all remaining restrictions aimed at curbing its spread.

Gross domestic product expanded 1.9% in the three months through March, compared with revised growth of 1.4% in the previous quarter, Statistics South Africa said Tuesday in a report released in the capital, Pretoria. The median of 13 economists’ estimates in a Bloomberg survey was for growth of 1.2%. The economy grew 3% from a year earlier.

At R1.15 trillion ($75 billion), the economy is about the same size as it was before the pandemic, the statistics agency said.

Africa’s most-industrialised economy remains stuck in its longest downward cycle since World War II and hasn’t grown by more than 3% annually since 2012. Policy paralysis, weak business sentiment and high levels of crime continue to weigh on fixed investment spending, with companies wary of committing large sums of money to domestic projects. Gross fixed capital formation rose 3.6% from the previous quarter.

Growth in household spending, which accounts for about two-thirds of GDP, was 1.4% in the first quarter. Household consumption expenditure is likely to come under pressure as consumers reel from surging fuel and food prices spurred by Russia’s war with Ukraine. The South African Reserve Bank’s biggest interest-rate hike in more than six years is also expected to weigh on consumer debt-servicing costs and disposable income.

Output is likely to slow in the second quarter after deadly floods in the eastern KwaZulu-Natal province — South Africa’s second-biggest contributor to GDP — damaged businesses and halted operations at the nation’s biggest port. State-owned power utility Eskom also implemented more frequent rolling blackouts, further curbing production.

Supply-chain disruptions stemming from China’s Covid Zero measures and war-induced tensions in the European Union are also risks to the domestic growth outlook. The central bank lowered its 2022 expansion forecast to 1.7% from 2%.

© 2022 Bloomberg

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