While expectations are for growth to be marginally higher than in 2017, when growth was revised from a tepid 0.3% to 0.6%, it is clear that President Cyril Ramaphosa missed the mark with ambitious dreams of 3% growth.
The reality is that growth will be considerably less than half of that.
The latest string of data from StatsSA shows that the economy lifted in December, but overall growth remained woefully below initial forecasts for the year. The GDP figures will be released by StatsSA on March 5.
“Data from [last] week suggests a soft end to 2018,” Capital Economics economist John Ashbourne said.
As it stands, both the Reserve Bank and the Treasury expect growth of 0.7% for the year — both having halved their growth forecasts during the course of 2018.
SA plunged into recession for the first time since the global financial crisis in the first half of the year, which saw economists and institutions alike revise down their growth forecasts. Annual growth has failed to breach the 2% mark in the last five years. The economy struggled to gain momentum despite political changes.
A positive final quarter for the retail sector, coupled with growth in manufacturing production and a few other sectors, will have helped SA maintain positive GDP growth in the fourth quarter of 2018, but a weak performance in the mining industry will weigh on the figure.
“The pace of economic recovery remains slow, as evidenced by the weak December mining production statistics,” Nedbank economist Johannes Khosa said.
However, the numbers are nothing to write home about. The December figures were below consensus while the overall numbers for the year were modest.
In 2018, mining production plunged 1.6% compared with 2017, while manufacturing grew slightly, by 1.2%, while retail trade sales saw a boost of 2.1%. Based on the data, compared to a year earlier the economy hardly expanded, NKC economist Elize Kruger said.
The wild cards are the agricultural and financial services sectors, which have pulled growth down in previous years. However, economists are positive that growth will be positive in the fourth quarter and for the year as a whole. But it’s a far cry from what SA really requires.
Realistically, SA would need sustained growth of at least 5% to make a meaningful dent in the unemployment rate, which is nearing the 30% mark by the narrow measure. Ramaphosa has assured the nation that 5% is a realistic target, but forecasts for 2019 already indicate that economists are pessimistic about growth.
A constrained consumer, a buckling mining sector and continued load-shedding will weigh on growth. The reality is SA is still unlikely to breach the 2% mark anytime soon.