South Africa GDP Q3 2016

South Africa

South Africa: Economic growth disappoints in Q3

December 6, 2016

Following the acceleration in the second quarter, South Africa’s economy disappointed in Q3. Official data released by Statistics South Africa (Stats SA) on 6 December show that in the third quarter, GDP expanded a weak 0.2% over the previous quarter in seasonally and annualized terms (quarter-on-quarter saar), which was well below the 3.5% increase seen in the previous quarter. The figure was below market expectations of a 0.5% expansion.

In annual terms, the economy stalled as GDP expanded 0.7%, which matched the previous quarter’s reading. South Africa’s economy remains stuck in a low gear due to myriad domestic and external problems. A slow recovery in global demand, weak commodity prices, political turmoil and the lack of much needed structural reforms are holding back growth. The country narrowly avoided a credit rating downgrade earlier this month, but it remains under high scrutiny and risks a rating review if the economic environment does not improve.

Q3’s deceleration came on the back of a steep deceleration in the external sector, while all components of domestic demand improved. Due to a base effect exports swung from a 22.8% increase in the second quarter to a 26.4% decrease in the third quarter on a sequential basis. Imports contracted 4.9% over the previous quarter, which was up from the 5.2% decrease seen in the second quarter. As a result, the external sector’s contribution to overall growth swung from plus 8.7 percentage points from Q2 to minus 6.8 percentage points in Q3, the lowest reading in over a year. In the third quarter, growth in private consumption improved from 1.4% in Q2 to 2.6%, which marked a multi-year high. Moreover, government consumption also increased and grew 2.1% in Q3, which was up from the previous quarter’s 1.4% rise. Fixed investment contracted 1.0%, which was less than the 6.8% decrease recorded in Q2.

In its Medium-Term Budget Policy Statement, the government announced that it expects the economy to expand 0.5% in 2016 and 1.7% in 2017. The Central Bank projects that the economy will grow 0.4% in 2016 and 1.2% in 2017. FocusEconomics Consensus Forecast panelists expects the economy to expand 0.4% in 2017, which is up 0.1 percentage points from last month’s estimate. For 2018, GDP is expected to grow 1.2%.

Author:, Senior Economist

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South Africa GDP Chart

SouthAfrica GDP Q316 0

Note: Year-on-year changes of GDP in %
Source: Statistics South Africa (Stat SA) and FocusEconomics Consensus Forecast.

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