Reza Hendrickse, Portfolio Manager at PPS Investments
The South African economy contracted 1.3% in real terms during the fourth quarter of 2022 (seasonally adjusted), shrinking more than economists predicted. Third quarter growth was however revised higher, from 1.6% to 1.8%, thanks largely to an upward revision in Agriculture, Forestry and Fishing.
For the calendar year, GDP growth came in at 2.0%, which is sharply lower than in 2021. The size of the economy remains around pre-pandemic levels, with the main constraint to growth being the dire state of Eskom’s power generation ability, resulting in loadshedding having become a daily occurrence.
During the fourth quarter, seven out of the 10 industry groups reported declines in growth, with only Transport, Construction and Personal Services having grown. This broad-based economic weakness is expected to spill over into 2023, with forecasters predicting the economy is already in a recession, typically defined by two quarters of economic contraction.
Overall, the quarter’s weak GDP print encapsulates the general deterioration in domestic conditions. Worse-than-ever loadshedding has been a major headwind for business and will continue to weigh for the foreseeable future, affecting both businesses and consumer sentiment as well. At the same time, consumers are also having to contend with higher interest rates and an increased cost of living, all of which speak to a challenging environment ahead, locally.
Get the latest issue of FAnews