SA Reserve Bank lowers GDP projection

The South African Reserve Bank (SARB) has lowered its expectations for South Africa’s GDP growth in 2023 to 0.2% from the previous 0.3%.

This revision comes in light of the SARB’s monetary policy committee’s announcement today of another interest rate hike and the continuation of South Africa’s hiking cycle.

In January, SARB governor Lesetja Kganyago set the reserve bank’s GDP growth projection at 0.3% in 2023.

“As a result of extensive load-shedding and logistical constraints, the supply performance of the economy remains severely impaired. As previously noted, these constraints deduct two percentage points from growth this year,” said the governor.

The SARB also revised its growth projections for 2024 and 2025.

However, the SARB identified upside risks to growth following 2023 and increased its projections for 2024 from 0.7% to 1.0% and, for 2025, from 1.0% to 1.1%. 

The revision comes in light of news earlier this month that South Africa’s GDP contracted more than expected in the fourth quarter of 2022, shrinking 1.3% in the three months through December.

This contraction has largely been attributed to continued and intensified load-shedding.

The SARB’s revision today widens the gap between the SARB’s GDP projections and National Tresury’s expectations.

Even before today’s revision, National Treasury was far more optimistic than the SARB, projecting a 0.9% growth in GDP for 2023.

It also projected a 1.5% growth in 2024 and a 1.8% growth in 2025.

Earlier this year, finance minister Enoch Godongwana attributed this gap to the difference in their models’ assumed severity of load-shedding.

The SARB’s projection is now more in line with the International Monetary Fund’s (IMF) growth projection for South Africa. 

The IMF recently announced that it expects South Africa’s real GDP growth to decelerate to 0.1% in 2023, mainly due to the effects of load-shedding.