Momentum Investments expects South Africa’s economic growth to average 2% in 2022 before slowing to 1.7% next year.
Stats SA released South Africa’s latest gross domestic product (GDP) figures yesterday, revealing the economy contracted by 0.7% quarter-on-quarter.
Extensive flood damage in KwaZulu-Natal and a higher load-shedding were the primary cause of growth disruptions in manufacturing, mining, and agriculture.
The latest gross domestic product (GDP) figures leave overall economic activity below pre-pandemic levels.
Poor performance across large sectors of the economy has resulted in six out of the 10 South African (SA) industries operating below average levels calibrated for 2019.
The largest contributions to growth in the second quarter, based on the production method, came from transport and financial services.
Based on the expenditure method, the largest contributors to growth came from household consumption, inventory and exports, while imports detracted the most.
Herman van Papendorp, head of investment research and asset allocation at Momentum Investments, said the local economy continues to face pressure.
The most challenging issues which raise notable downside risks to South Africa’s growth outlook include:
- Slowing global demand.
- The unwinding of accommodative monetary policy.
- Fiscal consolidation.
- Structurally high unemployment.
- Energy supply shortages.
“We expect growth to average 2% in 2022, before slowing to 1.7% next year,” Van Papendorp said.
He added that this year’s growth forecast aligns with the August 2022 Reuters Econometer poll, but their expectations are firmer than their 1.5% prediction for 2023.
“Our projection for 2022 is in line with that of the SA Reserve Bank’s (SARB), although they paint an even gloomier picture for growth of 1.3% for 2023,” he said.