Johannesburg - SA's economic growth came in at a negative 1.8% in the fourth quarter of 2008, raising fears that the country is in a recession and fuelling hopes of an emergency interest rate cut.
The 1.8% fall in gross domestic product (GDP), which is calculated quarter-on-quarter, seasonally adjusted and annualised, is the worst quarterly performance in a decade.
A recession is measured on the basis of two consecutive quarters of negative growth. Many economists believe the first quarter of 2009 will also be negative, confirming a technical recession.
"We are in a crisis, and all instruments must urgently be used to combat it. This means monetary policy and fiscal policy. Interest rates must be cut by next week, and the Unemployment Insurance Fund should extend the period of benefit paid to a year from nine months," T-Sec economist Mike Schüssler said.
Schüssler said the Reserve Bank would have room to cut interest rates after Wednesday's release of inflation data, which should show a big drop in the CPI rate.
Reserve Bank governor Tito Mboweni hinted in an interview with CNBC earlier in February that an emergency meeting of the monetary policy committee might be called if the GDP figures were really bad.
Nedbank economist Nicky Weimar said government and the Reserve Bank's belief that infrastructure spending would stave off a recession wasn't panning out.
She said the fourth-quarter GDP number was essentially the result of a 21% drop in manufacturing output, which she described as "dramatic stuff". She said this mirrored the global implosion in industrial production in the fourth quarter of 2008. She said the economy was in recession.
Absa Capital economist Monale Ratsoma said the global economic crisis had aggravated a slowdown already under way in the SA economy. He believed there was a "possibility" of an emergency interest rate cut.
Trevor's forecast
For the year as a whole last year, Stats SA figures showed GDP growth of 3.1% from a robust 5.1% in 2007. Absa and Nedbank both see full-year economic growth of below 1% for 2009, while Schussler is even more negative. However, he believes there should be a turnaround next year, helped by a bottoming in commodities prices and the boost from the 2010 Soccer World Cup.
Finance Minister Trevor Manuel is forecasting an economic growth rate of 1.2% this year.
His forecast is negative about consumer spending, projecting a small decline despite falling interest rates. However, he expects government consumption (growth of 4%) and fixed investment (growth of 3.7%) to prop up the growth rate.
Public sector infrastructure spending makes up a significant part of fixed investment, and is expected to grow strongly.
The weak economic conditions are taking their toll on jobs. Lonmin, the world's third-largest platinum producer, has confirmed that up to 5 500 jobs will be lost at its Marikana and Limpopo operations.
This followed news that the bulk of the 19 000 job cuts announced by Anglo American on Friday is likely to be in SA. Making up half of the planned job cuts is the reduction in Anglo Platinum's workforce by 10 000.
I-Net Bridge reports that Moody's Economy.com has warned that rising unemployment will put a damper on consumer spending in 2009 and slowing private consumption will weigh heavily on growth.
"Households will continue to cut spending, especially on discretionary goods, through most of this year. Despite easing interest rates, rising unemployment and a rapidly deteriorating economic landscape will continue to discourage retail spending," Moody's said.
- Fin24.com