South Africa: GDP falls back into contraction in Q3
The recovery stumbled in the third quarter, with GDP dropping 1.6% in seasonally-adjusted quarter-on-quarter terms, contrasting the previous quarter’s 1.1% increase. Meanwhile, on an annual basis, GDP growth moderated markedly to 3.0% from Q2’s record reading of 19.1%. The result was partly due to a fading base effect.
Domestically, the quarterly contraction was largely due to a decline in private consumption, which fell 2.4% in seasonally-adjusted quarter-on-quarter terms, swinging from Q2’s 0.8% expansion. The unemployment rate rose to a new record high in the quarter (Q3: 34.9%; Q2: 34.4%), weighing on spending in turn. Meanwhile, fixed investment flatlined in Q3, deteriorating from the prior quarter’s 1.2% increase. More positively, government spending bounced back in the third quarter, expanding 0.1% following the previous quarter’s 0.1% contraction.
Turning to the external sector, exports of goods and services contracted 5.9% over the previous quarter in Q3, swinging from the 3.5% expansion logged in Q2. Similarly, imports of goods and services declined 2.8% compared to the prior quarter (Q2: 0.0% s.a. qoq). Consequently, the external sector subtracted 0.8 percentage points from the overall reading in Q3, contrasting the prior quarter’s 0.8 percentage-point contribution.
Reflecting on the economy’s performance in Q3 and prospects for the months ahead, analysts at the EIU commented:
“South Africa’s […] joblessness has been exacerbated by a week of civil disorder, property damage and economic disruption in July, underlining the tough conditions facing firms and households. […] The identification of the new Omicron variant on 25 November, accompanied by the fresh imposition of global travel restrictions on Southern Africa, threatens to negate the hopedfor economic recovery and delay the government’s fiscal consolidation effort to late 2022.”