Reserve Bank slashes South Africa’s GDP growth forecasts

The South African Reserve Bank slashed South Africa’s real GDP growth forecasts for the next three years to 0.3%, 0.5%, and 1%, respectively.

Reserve Bank governor Lesetja Kganyago said South Africa’s economy grew by a relatively strong 1.6% in the third quarter of 2022.

“However, the expansion was not broad-based. We forecast no growth in the fourth quarter,” he said. “For the whole of last year, GDP growth of 2.5% is expected (up from 1.8%).”

Extensive load-shedding and other logistical constraints resulted in the Reserve Bank cutting its GDP growth forecast for 2023 to 0.3%.

“Given the scale of load-shedding, the Bank estimates that it deducts as much as two percentage points from growth in 2023, compared to the previous estimate of 0.6 percentage points,” he said.

Over the medium term, the forecast considers ongoing high levels of load-shedding and more modest household spending and investment growth than previously.

Investment is still positive but is revised down due to weaker confidence and lower expected growth.

With declining commodity prices, exports are also forecast to be less robust.

“The forecast incorporates an assumption of increased load-shedding in each year compared to what was pencilled in at the time of the November meeting,” he said.

As a result of these factors, the economy is forecast to expand by 0.7% in 2024, down from 1.4%, and by 1.0% in 2025, down from 1.5%.