Africa’s largest economy had better than expected economic growth this past quarter.
South Africa’s economy grew 3.2% in the fourth quarter compared with the preceding three-month period, with manufacturing providing a big boost, but the improvement still comes against the backdrop of government forecasts for slower 2012 growth.
The fourth quarter figure was slightly better than the 3.1% that economists had predicted and better than the disappointing growth in the third quarter, revised up to 1.7%. Overall growth for 2011 was 2.9% from the year before.
Despite the quarterly improvement, albeit from a low base in the preceding months, many economists continue to remain cautious on South Africa’s growth outlook. Gross domestic product could be constrained by problems in the euro zone and the general uncertain global financial market as well as South Africa’s own struggle to reduce its 23.9% unemployment rate.
The unemployment rate, combined with concerns about government overspending and an uncertain policy environment, led Moody’s Investors Service Inc. and Fitch Ratings to lower the country’s debt outlook to negative in the past six months.
The fourth quarter figure comes on the heels of the treasury’s 2012 budget preview last week, where Minister Pravin Gordhan revised down his growth target for 2012, predicting GDP to be 2.7%. The move follows a downward revision by the country’s reserve bank.
“Today’s GDP figures confirm that the economy remains vulnerable…. Performance remains uneven, with consumers providing the momentum and producers struggling to move forward,” economists at Nedbank said.
South Africa’s key manufacturing industry contributed 0.6 percentage point to the growth, the country’s statistics agency said as it released the data Tuesday. But Investec analyst Ilke van Zyl said manufacturing and mining still remain below their peaks reached in 2008 and 2007 respectively, in terms of value added at constant prices.
Protracted strikes across industries in 2011 dented manufacturing and mining output in the first months of the year and the risk remains for a repeat this year, analysts said.
“The many headwinds faced by the production side of the economy cannot be ignored: global demand is slowing, business confidence remains low, cost-push inflation remains rife and local industrial action is likely to emerge once again in 2012,” said Barclays analyst Gina Schoeman, referencing a continuing strike at Impala Platinum Holdings Ltd.’s Rustenburg operation.
The South African economy outweighs its three closest African rivals combined. The wellness of the South African economy is of vital importance to the region and continent. What happens to South Africa has reverberations across the continent.