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SA economy slams on brakes
Johannesburg - As industrialised countries move into recession, South Africa's economy is braking sharply and is likely to slow further. Yesterday Statistics SA released third-quarter figures showing that gross domestic product (GDP) grew only 0.2 percent, from a revised 5.1 percent in the second quarter - a quarterly change that has been seasonally adjusted and annualised.
Sectors that contracted were manufacturing (minus 6.9 percent), mining (minus 8 percent) and the sector that includes wholesale and retail trade as well as the hospitality industry (minus 6.9 percent). Combined, they make up more than 35 percent of total GDP.
Without the contribution from agriculture, which rose a massive 16.1 percent in the quarter, overall GDP would have contracted.
Worse news is that third-quarter growth was sustained by a 15 percent rise in construction GDP - a sector that is now showing signs of weakening.
Major construction firm Murray & Roberts warned investors yesterday that "the potential impact of current market volatility may manifest itself on the construction sector".
Colen Garrow, an economist at Brait, said the sector, "which has outperformed overall GDP for two years, is unlikely to perpetuate its double-digit performance".
After the recent fall in commodity prices, the mining sector is likely to deteriorate further in the fourth quarter. And with consumer demand depressed and exports slowing, manufacturing and trade will also remain under pressure.
Given this gloomy outlook, GDP growth this year is likely to be lower than the 3.7 percent projected by finance minister Trevor Manuel in his medium-term budget speech last month.
Kevin Lings, an economist at Stanlib, forecast growth of 3 percent for this year, down from 5.1 percent last year.
"For 2009 we now forecast GDP to slump to only 1.7 percent, with most key sectors of the economy expected to be under pressure," he said.
Jean-Francois Mercier, an economist at Citi, put this year's growth at 3.3 percent. Fanie Joubert, an economist at the Efficient Group, forecast 3 percent falling to 1 percent next year.
South Africa, like other emerging markets, is affected by looming recessions in advanced economies.
The economy shrunk an annualised 0.5 percent in the third quarter in the US, 0.8 percent in the EU - the second consecutive quarterly contraction - 0.5 percent in the UK and 0.4 percent in Japan. A recession is generally defined as two consecutive quarterly contractions.
Financial management company Merrill Lynch warned yesterday that "the world economy is on the brink of a severe global recession".
It identified advanced economies as the source of the problem, "notably the euro area, Japan and the US", which "have taken a big hit in the areas of consumer spending, business investment and trade, while business and consumer sentiment continues to deteriorate sharply".
It predicted that the world economy would expand by "only 1.3 percent next year, the lowest since 1982".
Last month the International Monetary Fund (IMF) cut its 2008 global growth projection to 4.8 percent, from 5.2 percent forecast in July. However, the IMF still expected "robust growth in India, China and Russia" to compensate for slow growth in the US.
While this may still be true, growth in emerging economies is threatened by weak export markets, sharp falls in commodity prices and funding constraints originating in the developed world. |
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