5 out of 10 sectors in the economy have now shown a decline

by Raymond Parsons: Professor at the NWU School of Business & Governance and a former special policy adviser to Busa.
The decline in 3Q GDP growth to -0.2% from 0.5% in 2Q 2023 was worse than expected, negative factors having clearly dominated the positive ones to a greater extent than anticipated in that period. Although there was a temporary betterment in energy availability in that quarter, several other key high frequency indices at the time already warned of a loss of economic momentum. Five out of ten sectors in the economy have now shown a decline in 3Q GDP growth.

Similar economic trends are likely to also prevail in shaping a likely weak GDP growth outcome in the current 4Q 2023. The decline in fixed capital formation in 3Q 2023 is also a red flag. The year is likely to end with muted economic activity. SA must now avert the possibility of a ‘technical recession’ (two consecutive quarters of negative growth) developing against the poor economic background of 3Q 2023.

Apart from other global and domestic headwinds, growth expectations in SA remain heavily dependent in particular on load-shedding being steadily phased out and a higher level of energy security being achieved than presently seems to be the case. Furthermore, there are now also bottlenecks in Transnet’s rail and port services that are imposing widespread disruption and heavy additional costs on the economy.

These cumulative infrastructural setbacks require urgent remedies – such as the recent Transnet loan guarantee by the National Treasury – to be successfully implemented to sustain SA’s growth performance next year. The latest GDP growth figures inject new urgency into the policy and project actions needed to underpin economic growth.

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