SA's GDP drops 1.8 percent in fourth quarter 2008

Tuesday, February 24, 2009

Pretoria - South Africa's Gross Domestic Product (GDP) figure at market prices for the fourth quarter of 2008 has contracted by 1.8 percent quarter-on-quarter (q/q) from 0.2 percent growth in the third quarter, Statistics South Africa (Stats SA) announced on Tuesday.

South Africa's economy has come under increasing pressure with growth in the mining and motor manufacturing sectors slowing as a result of the global economic recession.

The sectors that led to a reduced GDP figure in the fourth quarter include the manufacturing industry, electricity, gas and water industry, while wholesale and retail trade, hotels and restaurants did not contribute to economic growth at all.

South Africa's growth figures for the first three quarters of 2008 were recorded at 1.7 percent, 5 percent and 0.2 percent respectively, Stats SA said.

Econometrix Treasury Management (ETM) economist Russell Lamberti told BuaNews that the country was not technically in a recession, despite the negative growth in the economy.

"In economic and finance circles, a textbook definition of recession is two consecutive quarters of negative growth. So in plain English terms the economy has receded, but we are not in a recession," Mr Lamberti said.

If the country's quarter one 2009 GDP figure reports negative growth, then South Africa will officially be in a recession.

Stats SA also reported that the positive contributions to economic growth had come from the finance, real estate and business services industry, agriculture, forestry and fishing as well as general government services.

The construction, transport, storage and communication, and personal services sectors also experienced positive growth in the third quarter.

"The seasonally adjusted and annualised real value added by non-agricultural industries increased by 1.1 percent and 5 percent during the first and second quarters of 2008 followed by decreases of 0.5 percent and 2.2 percent during the third and fourth quarters of 2008.

"The unadjusted GDP at market prices increased by 3.9 percent, 4.5 percent, 3 percent and 1 percent during the first, second, third and fourth quarters of 2008 compared with the same quarters in 2007."

The annual GDP growth for 2008 is reported as 3.1 percent, compared to a GDP increase of 5.1 percent in 2007.

The main contributors to an increase in economic activity for 2008 were the finance, real estate and business services industry, agriculture, forestry and fishing, construction and general government services.

Stats SA said the wholesale and retail industries, as well as the mining and quarrying and manufacturing sectors, were all responsible for either no growth or negative growth in 2008.

The increases in interest rates in 2008 was a likely reason for South Africa's slowing economic growth, but repo rate cuts of 50 and 100 basis point cuts in December 2008 and February 2009 should give the economy a boost.