South Africa Stares Down Economic Abyss Amid Energy Crisis, New GDP Figures Awaited

A tense economic scenario ensues as South Africa prepares to confront its latest GDP figures amid sweeping power cuts and inflation.

In an environment characterized by the double blow of persistent power blackouts and soaring inflation, South Africa teeters on the brink of an economic free fall. A weakened rand, steadily climbing interest rates, and a rampant cost of living crisis paint a grim backdrop as Statistics South Africa is scheduled to unveil the nation’s GDP figures this Tuesday.

Recession in the Rear-view

A repeat performance of economic contraction appears to be on the cards for South Africa, a situation aggravated by the incessant load shedding. This arrives on the heels of a disappointing 1.3% quarter-on-quarter contraction experienced in the final quarter of 2022.

Breakdown of the 2022 GDP Contraction

In an economy-wide slump, only a few sectors managed to buck the trend, namely transport, construction, and personal services, which saw a modest growth in the last quarter.

A First Quarter Mild Recession?

FNB’s senior economist, Mamello Matikinca-Ngwenya, weighed in on the economic landscape last Friday. She pointed towards a potential “mild recession” marking the economy’s performance in the initial quarter of this year.

She voiced concerns over the volatile agricultural sector and unpredictable changes in specific private service sectors, flagging them as potential hazards for the first quarter’s GDP performance.

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“In view of this context and the imminent GDP revisions, we stand by our prediction of a mild first-quarter recession,” Matikinca-Ngwenya declared.

Comparative African Economic Outlook

While South Africa grapples with a bleak economic forecast, the broader African continent appears poised for a brighter future. Last month, the African Development Bank (AfDB) projected an uptick in Africa’s economic growth in 2023 and 2024, standing in stark contrast to South Africa’s looming economic plunge.

Predictions on GDP: A Note of Caution

KPMG’s lead economist, Frank Blackmore, speaking to Business Report, addressed the uncertainty clouding the GDP numbers. He acknowledged the negative impact of power outages curtailing the economy’s potential, deteriorating infrastructure inhibiting movement and commodity exports, as well as increased private sector investments as they grapple with these challenges.

“Taking various impacts into account, I anticipate a contraction in GDP growth for the first quarter, although a specific number remains elusive,” Blackmore concluded.

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