GDP Growth Surprises In South Africa

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  • South Africa’s real GDP growth rate surprised on the upside, accelerating to a 3.1% quarter-on-quarter seasonally adjusted annualized rate (SAAR) during the fourth quarter of 2017.
  • Overall real GDP growth averaged 1.3% in 2017. Revised GDP numbers produced by the South Africa Statistical Service, StatsSA, now also show that South Africa avoided a recession during 2017.
  • For 2018, IHS Markit expects real GDP growth to average 1.6%, with the risk tilted towards an upward growth surprise amid favorable policy adjustments, including a 50 basis point interest rate cut this year.
  • The South African economy will also benefit from positive business and consumer sentiment following the election of Cyril Ramaphosa as the new leader of the African National Congress (ANC) and his subsequent inauguration as the president of the country. However, concrete business friendly economic policies will now be required to spur investment further along.
  • We do not expect a downgrade of South Africa’s local currency debt rating during March 2018 but the risk of a downgrade later in the year remains significant.

South Africa’s real GDP growth rate accelerated at a 3.1% quarter-on-quarter SAAR during the fourth quarter of 2017, higher than the market consensus of 1.8% SAAR. This contributed to headline GDP growth of 1.3% in 2017 from 0.6% in 2016. Revised GDP numbers for the previous three quarters of 2017 produced by the South Africa Statistical Service, StatsSA, now also show that South Africa avoided a recession during 2017.

Agricultural sector props up growth during 2017

Primary sector GDP increased by 4.9% SAAR during 2017 Q4: a double digit rebound in agricultural production mitigated a downturn in output in the mining sector during the fourth quarter. Secondary sector economic activity rose by 3.1% SAAR: both the manufacturing and water and electricity sub-sectors recorded strong growth while the growth rate in the construction sector weakened reflecting dismal residential and non-residential building activity. Tertiary sector GDP growth averaged 2.7% SAAR in 2017 Q4: sectors showing the largest contribution to the tertiary sector’s growth performance included wholesale and retail trade sales and the financial sector. Weaker growth of between 0.1%-0.2% SAAR was recorded in the transport and communications, government services and personal services sub-sectors.


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