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Johannesburg - The local economy is expected to grow by 3.3% as it shrugs of its recessionary blues, Absa Capital's economics team said on Thursday.
The economy's growth or gross domestic product (GDP) has so far exceeded expectations, said Jeff Gable, Absa Capital head of research at a media briefing in Sandton.
"The way in which it surprised our macro view is the nature of the growth," said Gable.
According to Gable, the group moved its forecasts as the country's better-than-expected economic performance was based largely on consumer spending.
GDP jumped by 3.2% in the fourth quarter of 2009, coming in impressively above market expectations of 2.6% growth for the quarter.
"Data from the demand side of the economy revealed the consumer is on the road to recovery," said Gable. "Significant rate cuts are clearly helping the consumer."
Household disposable consumption spending grew 1.4% quarter-on-quarter following the previous quarter's near -2% contraction.
'Soccer Cup could curb GDP'
Interest rate cuts since December 2008 have helped households service their debt levels, and lower inflation results gave the SA Reserve Bank space to cut it by another 500 basis points in March, said Gable.
An example of an industry benefiting from the consumer's improving fortunes is the car sector. New vehicle sales rose by 21% year-on-year in February.
However, Gable warned the country's gradual recovery will boost electricity demand to pre-recession levels. The traffic jams and dark offices of 2008 have been forgotten in the light of the recently-announced electricity tariffs.
"The underlying problem is not how to finance [Eskom] - rather, it's where we'll find the electricity so the economy can grow.
"If South Africa is to grow quickly, the industries that use electricity lightly need to grow the fastest," he said.
Gable also said the 2010 Fifa World Cup's overall macroeconomic impact will be limited. "It looks like the number of visitors will be woefully less than the 400 000 initially expected."
In fact, the World Cup could cut GDP growth. "When Bafana Bafana is playing I can't see many people working."
- Fin24.com