South Africa GDP Growth Quickens for First Time in 4 Years

South AfricaSkyscrapers stand on the city skyline looking west from the Carlton Center in Johannesburg, South Africa
  • South Africa GDP Growth Quickens for First Time in 4 Years

South African economic growth accelerated for the first year in four in 2017 as agricultural output surged following a recovery in output after the worst drought in more than a century.

Gross domestic product expanded 1.3 percent last year, more than National Treasury’s forecast of 1 percent. Political and policy instability that hurt investor confidence in 2016 continued in 2017, curbing the recovery in Africa’s most-industrialized economy and prompting both S&P Global Ratings and Fitch Ratings Ltd. to cut the nation’s debt to junk.

The outlook improved in December, when the ruling party elected a new leader who promised to tackle graft.

The economy grew an annualized 3.1 percent in the fourth quarter from the previous three months compared with a revised 2.3 percent expansion in the prior quarter, Pretoria-based Statistics South Africa said in a statement. The median estimate of 14 economists surveyed by Bloomberg was for growth of 1.8 percent.

The improved quarterly performance came as agricultural output rallied 38 percent from the prior three months and mining production fell 4.4 percent. Fixed capital formation improved 7.4 percent, the first expansion in a year.

While the growth rate hasn’t exceeded 2 percent since 2013, prospects for this year are looking up. Business confidence climbed to the strongest since October 2015 in January, having fallen to a three-decade low in August. The purchasing managers’ index was above 50 in February, indicating expansion in the manufacturing industry.

“The outlook does look better,” Gina Schoeman, an economist at Citibank Inc. in Johannesburg, said by phone. “It certainly suggests that there certainly is an end to the downward cycle.”

South Africa’s economy could expand 1.5 percent this year, the National Treasury said on Feb. 21. Growth will probably accelerate to 2.1 percent in 2020 as measures aimed at creating policy certainty and attracting investment pay off, it said.

The National Treasury will probably raise these projections in the October mid-term budget as South Africa overcomes governance and financial problems, Finance Minister Nhlanhla Nene said March 5.

About the Author

Samed Olukoya
CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and, with over a decade long experience in the global financial market. Contact Samed on Twitter: @sameolukoya; Email: [email protected]

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