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Picture: 123RF/XTOCK IMAGES
Picture: 123RF/XTOCK IMAGES

The economy is likely to grow at a faster pace in the second quarter than economists forecast, according to an index with a strong correlation to GDP.

The BankservAfrica economic transactions index, which tracks interbank payments, climbed 3.9% in the second quarter from the first three months of the year. This suggests “underlying momentum in the economy might have been stronger than generally perceived”, independent economist Elize Kruger said. 

A median estimate of 23 economists in a Bloomberg survey projects an expansion of 1.2% from a year earlier and a contraction of 0.6% quarter on quarter.

Better-than-expected economic growth would boost tax revenue, helping rein in government debt and narrow the budget deficit at a faster rate. Debt is set to peak at 75.1% of GDP in 2024/2025 and then gradually decline, while the budget shortfall is forecast at 4.2% of GDP in 2024/2025, according to treasury estimates. Beating those projections would bolster the attractiveness of local assets to offshore investors. 

On a monthly basis, the index fell for the first time in 2022 to 136.7 in June from a revised 143 in May because of increased power cuts and a significant rise in fuel and food prices, and the general inflation rate, Kruger said.

Eskom implemented stage 6 load-shedding —- removing 6,000MW from the grid — for the first time since 2019 in June and inflation breached the 6% ceiling of the central bank’s target range in May.

While continued load-shedding is likely to weigh on economic growth this quarter, the removal of all remaining Covid-19 regulations at the end of June may help counter that negative effect.

“A further recovery towards pre-Covid activity levels in some sectors — where restrictions still applied — will support general economic activity in the coming months,” said Kruger.

More stories like this are available on bloomberg.com
Bloomberg 


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