SA’s economic growth for 2018 gets off to a dire start
SA’s economic growth in the first quarter of 2018 is expected to take a knock after a dire start to the year for the mining and manufacturing sectors.
Data from Stats SA released on Thursday painted a gloomy picture. In the first quarter of the year manufacturing decreased by 1.6% while mining production decreased by 3.4%. Both sectors are significant contributors to GDP.
SA is estimated to have the world’s fifth largest mining sector in terms of its contribution to economic growth, contributing 8% to the country’s economy in 2017. Manufacturing contributed 13%, but this is significantly lower than its 24% contribution in the 1980s.
Contractions in both sectors do not bode well for economic growth. Despite growth revisions upwards from the International Monetary Fund (IMF) and the World Bank in 2018, Capital Economics economist John Ashbourne said the economy seems to have stumbled in the first quarter.
He added that strong economic growth in the fourth quarter of 2017 created a high basis for comparison.
According to the IMF’s world economic outlook, economic growth is expected to strengthen to 1.5% in 2018 from a previous forecast of 0.9%, and to and 1.7% in 2019, also from 0.9%. This comes after growth was revised down to below 1% in January.
The World Bank expects growth to accelerate to 1.4% in 2018 from a previous estimate of 1.1%; economic growth is expected to remain below 2% in the medium term.
Even with the bleak outlook for growth in the first quarter, Ashbourne said: "We retain the view that economic growth will accelerate over the course of 2018 as a whole."
The mining figures were partially a result of temporary maintenance-related shutdowns in the platinum sector, which cut output in February and March, said Ashbourne.
Stronger global demand and firmer international commodity prices are expected to support production and exports in 2018, said the Nedbank Group Economic Unit.
The Manufacturing Circle, the voice for the sector, warned that manufacturing remains volatile. "We need to keep a close eye on how the manufacturing environment monitors and responds to such changes in circumstances in the short term."
Despite a rosier outlook for the year, the first quarter figures may come as a shock after stronger than anticipated growth in 2017.