Economic growth slows to 0.2%

26 November 2008

Economic growth slowed to 0.2% in the third quarter of the year, the lowest in over a decade, down from a revised rate of 5.1% in the second quarter, Statistics South Africa (Stats SA) reported on Tuesday.

Growth was dragged down by contractions in the mining (down by eight percent), manufacturing (-6.9%), and wholesale and retail trade and hospitality (-6.9%) industries. Together, the three sectors account for some 35% of South Africa’s gross domestic product (GDP).

However, strong growth in agricultural output by value (up by 16.1%) and increased activity in the construction sector (+15%) ensured that South Africa’s overall economic growth did not contract.

Overall economic growth for the first nine months of 2008 stood at 3.7% compared to the same period last year.

Rate cuts

According to a Business Day report this week, the GDP numbers reinforced the view that the South African Reserve Bank would lower interest rates – which have been hiked by 5% since 2006 – sooner rather than later.

“Households can’t cope with high interest rates – everything related to households is down,” the paper reports Stats SA GDP manager Kedibone Mokone as saying.

Citadel economist Dave Mohr told Business Day that South Africa would not be able to avoid entering recession next year – something that has not happened since 1992.

“There is a recession all over the world – why should we escape it?”, Mohr told the paper.

Lower growth in 2009

Stanlib economist Kevin Lings, meanwhile, forecast growth of 3% for the current year, down from 5.1% last year. “For 2009, we now forecast growth to slump to only 1.7%, with most key sectors of the economy expected to be under pressure,” a Business Report article this week says.

According to Business Report, Efficient Group economist Fanie Joubert forecast economic growth to slow to one percent next year, adding that South Africa, like other emerging markets, was affected by looming recessions in advanced economies.

Stats SA noted, however, that economic growth normally picks up in the fourth quarter of any given year. “You get the picture that although the economy is slowing . we are a bit more resilient,” Stats SA economic statistics deputy director-general Rashad Cassim told Business Day.

SAinfo reporter

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