Positive South African GDP outlook for 2022 by economist Hugo Pienaar

Hugo Pienaar, chief economist at the Bureau for Economic Research (BER), said it is unlikely that GDP will fall in the third quarter.

Stats SA released South Africa’s latest gross domestic product (GDP) figures yesterday, revealing the economy contracted 0.7% in the three months through June.

The GDP decline matched economists’ and analysts’ expectations of a slump of around 0.8%.

It was the first GDP decline since the third quarter of 2021, when deadly riots and a cyberattack at the state-owned port and freight rail operator weighed on the economy.

The data further showed that South Africa’s economy is smaller than before the coronavirus pandemic.

Factors which stifled growth include the worst flooding in almost three decades and continued load-shedding.

Although this is not good news for the country, Pienaar highlighted that real GDP growth for the year is still likely to be positive.

“Given the data we have for the first half of the year, if there is no quarter-on-quarter growth in Q3 and Q4, real GDP growth for 2022 will be 1.6%,” he said.

“To forecast less than that, one must assume another quarter-on-quarter contraction, either in Q3 or Q4. At least for Q3, this seems unlikely.”

He explained that the third quarter of the year would be the first entire quarter since Q4 2019 with no Covid-19 restrictions and supporting services.

Also, ongoing recovery from the KwaZulu-Natal flood devastation and improved gold mining output following a prolonged strike should assist third-quarter GDP.

The backpay of social relief of distress (SRD) grants that were not paid for the period in the second quarter should also support outlays on non-durable goods during Q3.

“I am not expecting strong growth because of load-shedding and high inflation constraints, but I don’t see GDP falling again in Q3,” he said.