GDP growth for 2018 slightly higher than expectations
The growth has been driven by the finance, real estate and business services sector, as well as general government services
SA emerged out of 2018 with economic growth of 0.8% — which is slightly higher than expectations.
The Bloomberg consensus was for growth of 0.6%, while both the National Treasury and the Reserve Bank expected growth of 0.7%. This is higher than the tepid growth of 0.4% in 2016 but almost half the 1.4% recorded in 2017.
Despite the slow growth in 2018, analysts say that the outlook for the economy is likely to improve in 2019, with growth upwards of 1.5% expected on greater political certainty and the continued momentum from the fourth quarter.
The growth has been driven by activity in the finance, real estate and business services sector, which was up by 1.8%, and general government services, which was up by 1.3%.
In the fourth quarter of 2018, GDP grew by 1.4% bolstered by the manufacturing sector, which grew 4.5%; the finance, real estate and business services sector, which grew by 2.7%; and the transport, storage and communications sector, which grew by 7.7%.
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Mining, which fell by 3.8%, weighed on the overall figure.
Compared to the same period the year before, GDP grew by 1.1%. Expenditure on GDP grew by 0.7% overall in 2018 and by 1.6% in the fourth quarter of the year.
Growth was revised for the three previous quarters. In the first quarter, it was revised down from -2.6% to -2.7%, and in the second quarter from -0.4% to -0.5%. In the third quarter, growth was revised up from 2.2% to 2.6%.
The economy struggled to gain momentum in 2018 despite political changes after President Cyril Ramaphosa’s election. SA moved into recession for the first time since the global financial crisis in the first half of 2018, which saw economists and institutions alike revise their growth forecasts down which weighed heavily on growth for the year.
Annual growth has failed to breach the 2% mark since 2013.
Analysts say SA will need sustained growth of at least 5%, in line with the National Development Plan (NDP), to make a meaningful dent in the unemployment rate, which is nearing the 30% mark.
Growth improving, but not by enough
Growth is expected to lift in 2019 but forecasts indicate that GDP will still be below 2%, particularly as the economy battles headwinds. The Treasury and the Reserve Bank expect the economy to expand by 1.5% and 1.7%, respectively, in this year.
“The news from the start of this year, including a collapse in the manufacturing [purchasing managers index] last month, and load-shedding by Eskom have been downbeat,” Capital Economics economist William Jackson said.
Growth prospects have also been hurt by political uncertainty and slowing global economic momentum. However, Jackson said the data from the fourth quarter will likely maintain its momentum into 2019.
“More positively, there is a clear intention on the part of government to lift growth and employment over the next few years,” Stanlib chief economist Kevin Lings said.
Lings cited the commitment to restructure and support Eskom, moves to resolve the financial difficulties in other key state-owned entities, as well as a difficult but necessary 2019 budget.
Said Lings, “The success of this year’s budget will be determined by the government’s ability to make real progress on implementing these reforms over the next 12 months. This is also going to be critical if the government wants to maintain its investment grade credit rating from Moody’s [Investors Service].”
Correction: March 5 2019
The revised figures for the first three quarters of 2018 were previously juxtaposed. This has been corrected.