After a surprising rebound in the third quarter, South Africa’s economy recorded a deeper-than-expected contraction in the last three months of 2022.
According to data from Statistics South Africa, the country’s GDP fell by 1.3% in the fourth quarter of 2022, bringing the size of the economy back below the level before the Covid-19 pandemic. Analysts had expected a smaller 0.4% contraction during the quarter, which saw the country’s economy suffer from higher electricity load levels.
All major economic sectors shrank during the quarter, including mining, manufacturing, finance and retail.
The data adds to an already bleak picture of South Africa’s economic growth heading into 2023.
In January, the South African Reserve Bank gave a forecast on the economic health of the country affected by the energy crisis, forecasting GDP growth of only 0.3% in 2023. growth this year.
The Reserve Bank’s medium-term expectations are not much better, with the economy forecast to grow by 0.7% in 2024 (down from 1.4%) and 1% in 2025 (down from 1.5%).
The Treasury is slightly more bullish on growth, forecasting in the budget that GDP will expand by a still-meagre 1.4% over the medium term. According to treasury forecasts, South Africa’s economy is expected to grow by 0.9% in 2023 and will recover slowly to 1.8% in 2025.
“This rate of economic expansion,” the budget notes, “is less than the pace needed to generate significant employment and support national development.”
Ratings agencies have identified South Africa’s low growth potential as a major credit weakness, hampering the country’s efforts to regain an investment-grade rating.
In response to South Africa’s budget, which was sent by Finance Minister Enoch Godongwana last month, Aurélien Mali, senior vice president of credit at Moody’s, said: “The failing electricity sector, with the level of load shedding, could lead to lower growth this year and next than current government estimates.