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Johannesburg – Although Statistics South Africa reported 3.3% growth in the second quarter, there is still concern over the outlook for the remaining half of the year.
A report released on Tuesday showed that the turnaround was attributed to rebounds in the mining and manufacturing sectors. But it is depressed consumer and business confidence that may lead to a slowdown in growth in the third quarter of the year.
What the rebound did was ensure that we do not have negative growth, said Lesiba Mothata, chief economist at Investment Solutions. “But all is not bright for the second half of the year.”
Rising inflation, a dip in hiring intentions by businesses, muted credit growth and constrained consumer spending will impact future growth, explained Sanisha Packirisamy, economist at MMI Holdings.
MMI expects gross domestic product growth at below 0.5% in 2016, and to increase to around 1% in 2017. Elevated political risks and “soft growth” in corporate profits are likely to limit investment growth.
FNB senior industry analyst Jason Muscat said in a statement that GDP growth for 2016 could turn to the upside. But even so, that would not be enough to avert a sovereign downgrade.
READ: Fears grow of ratings downgrade - OAM
Rating agencies' decisions depend on what will happen in the “political realm”, said Mothata. Together with external factors, it would be easier to avoid a downgrade if there were improvements in business and consumer confidence and lending.
“Going forward to ensure growth (we) must have policy certainty, especially on fiscal policy,” he said.
Despite analysts signalling caution, the ANC said in a statement that it is “encouraged” by recent positive signs in the economy, listing the 3.3% turnaround in GDP from -1.2% in the first quarter, as well as the rand’s bounceback.
Following the positive performance in the manufacturing sector and mining, which collectively contributed 1.8% to overall GDP, the ANC called on stakeholders in these sectors to build on the successes.
Mothata explained that the uptick in mining was mainly due to the depreciated currency, which was almost 20% down. This pushed up demand. Growth in demand was also coming off a low base which was reflected in the growth figures. Mining GDP was up 11.8% from the previous quarter and manufacturing grew 8.1%.
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