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SA economy shrinks more than expected

Mar 07 2017 11:31
Lameez Omarjee

Pretoria – The country's gross domestic product contracted 0.3% in the fourth quarter of 2016, according to Statistics South Africa (Stats SA).

Stats SA released the data in Pretoria on Tuesday. Overall GDP grew by 0.3% in 2016. This is lower than growth of 1.3% reported in 2015.

The main contributors to negative GDP growth were the mining and quarrying industry and the manufacturing industry.

Commodities showed a declining trend, according to Michael Manamela, chief director of national accounts. Mining and quarrying decreased by 11.5% due to a drop in the production of coal, gold and other metals including platinum.

Manufacturing decreased by 3.1%. This was brought on by a decline in manufacturing of food and beverages, petroleum, chemical products, rubber and plastic products as well as motor vehicles, parts and accessories of transport equipment.

Agriculture declined by 0.1% but although negative, it showed signs of improvement, said Manamela. “What is important is that the trajectory is upward and we should see an improvement in 2017.”

The primary and secondary sectors declined by 9% and 1.8%, respectively.

The tertiary sector grew by 1.3%. The largest contributors to GDP include trade, catering and accommodation industry and finance, real estate and business services.

Expenditure on GDP

Expenditure on GDP decreased by 0.1%, and overall expenditure lifted 0.5% in 2016. This is lower than the expenditure of 1.2% reported in 2015. 

Household final consumption expenditure increased by 2.2% in the fourth quarter.  It contributed 1.3 percentage points to total growth. The largest contributors to growth include food and non-alcoholic beverages which went up 2.4%, and clothing and footware which rose 10.4%.

Growth in semi-durable goods grew 6.8%, followed by services at 3.2% and non-durable goods at 0.3%. Durable good spend only increased by 0.2%.

Government final consumption expenditure increased 0.3%.

Growth in investment expenditure increased by 1.7%. The largest contributor to growth was construction works, which increased 3.6% and contributed 1.2 percentage points to growth.

Net exports contributed positively to growth in expenditure, said the report. Exports increased by 12.5%, due to higher exports of precious metals and mineral products. Imports increased by 6.1%.

Fin24 previously reported that economists were expecting low growth in the fourth quarter. South Africa’s GDP growth rate on a yearly basis until the end of September 2016 was at 0.7%, which was impacted by a 0.1% contraction in the first quarter of 2016 and low growth in the following quarters.

READ: Little growth expected from GDP stats release

South Africa’s GDP growth rate on a yearly basis until the end of September 2016 was at 0.7%, which was impacted by a 0.1% contraction in the first quarter of 2016 and low growth in the following quarters.

Further, the Business Confidence Index declined to 38 in the fourth quarter of 2016 from 42 in the previous period, explained Giacomo Bonavera, head of foreign exchange trading at Capilis Asset Managers, who wrote in Finweek on Monday.

“An increase in activity in the finance, transport and communication, real estate and construction sectors was offset by a decline in the agriculture, mining and manufacturing industries,” he said.

National Treasury said in its budget in 2017 that it expected the country to grow by 1.3% in 2017, and by 2% in 2018. It also sees inflation falling to 6.4% in 2017 and 5.7% in 2018. 

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stats sa  |  economy  |  gdp

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