Will economic growth stutter at around 2% this year?

Much is made of the fact that official personal insolvency and corporate liquidation data is generally improving, although there are many that doubt the veracity of this. Stats SA reported a year-on-year fall in liquidations of 12.4% in April, with the y

Civil debt statistics paint a far more concerning picture. The number of default judgments against businesses in March fell 13.3% with the year-to-date total of judgments falling 19.3% over the 1st quarter of 2012. However, the value of judgments against firms rose almost 86% in March from a year earlier to R144.7 million with the year-to-date figure rising 61%. This caused the average value per judgment to double from R20,971 in the 1st quarter of 2012 to R41,852 this year. Credit Guarantee’s claims experience bears this out with total May claims payments jumping almost 32% and average year-to-date values rising 67%. Our overdue payments indicator has been trending up for quite some time and while it appears to be reaching a plateau, the year-to-date trend is marginally up on last year.

Against this backdrop, we do not foresee a let-up in pressure on business in the months ahead, with payment defaults and liquidations set to trend higher. The real concern will be if the economy fails to gain traction in the second half of 2013 with fragile confidence, further strikes and disruptions, continued pressure from rapidly escalating input costs (with more to come in the form of e-tolls) and consequently demand growing only marginally. Moreover, while the rand continues to approach R10/$, imported inflation may cause further pain. The current daily under-recovery on petrol and diesel prices is around 62 cents per litre and 57 cents per litre respectively. Affordability at many levels is currently under severe strain. We expect that GDP growth will struggle to exceed 2% in 2013 amidst sluggish domestic demand and a lethargic global outlook.