GDP expected to continue weaker trend

Monday, August 17, 2009

Pretoria - Economists are expecting the Gross Domestic Product (GDP), due to be released on Tuesday, to come in weaker, despite the global economic recovery.

"Although it could be seen that there is some form of recovery in the global economy, South Africa's data is very weak," Nedbank economist, Nicky Weimer told BuaNews.

She predicted a -2 percent contraction for the second quarter of 2009, which while weaker, is at a reduced pace.

In May, South Africa recorded an annualised 6.4 percent contraction in GDP, the second contraction in a year indicating that the economy was in a recession for the first time in 17 years.

However, Ms Weimer said that the agriculture sector could sway the negative figure into the positive. "A lot depends on agriculture, it could be a swing factor that could lead to a massive increase or a marginal improvement in the figure."

Standard Bank senior economist Dr Johan Botha said he expected mining and manufacturing to do better in the second quarter than in the first and this could boost the GDP figure too.

The sectors that led to a reduced GDP figure in the first quarter were the manufacturing industry (-3.3 percentage points), mining and quarrying (-1.7 percent), finance, real estate and business services industry (-0.5 percent).

"The figures will be less of a surprise compared to the first quarter. The figures will be slightly better," said Mr Botha, who added he foresaw a -2.9 percent contraction.

Economist Bureau for Economic Research (BER) Hugo Pienaar said they were predicting a larger -3.4 percent quarter-on-quarter decline which was an improvement from the first quarter.

It was likely that there would be an improvement in manufacturing and mining, however, the financial sector is still under pressure, especially with regards to credit demand.

"There will be yet another contraction but not as big as in the first quarter," said Mr Pienaar.

Following the release of the GDP figures for the first quarter of the year in May, Director General in the National Treasury Lesetja Kganyago said that the economy was likely to improve in the second half of the year.

At the time, he said the economy was expected to contract further before growing again in the second half of this year.