SA economy shrinks 0.6% in third quarter, surprising even pessimists

The economy shrank 0.6% in the third quarter of 2019, Stats SA said on Tuesday, underscoring the plight South Africa is in as it battles rising unemployment, poverty and inequality.

The outcome, which was worse than the market had expected, is likely to raise fears that SA may manage only marginal growth, if any, for the full year. Economists surveyed by Bloomberg were expecting a 0% increase for the third quarter, reports BusinessLIVE.

Growth measured in the nine months to September reached just 0.3%, while growth had only managed to reach 0.1% year on year.

The fall comes after revised growth of 3.2% for the second quarter, coming after a 3.1% contraction in the three months to March.

The declines in GDP, as measured in production, were driven mainly by falls in the mining, manufacturing and transport, storage and communications industries.  

Mining shrank 6.1% in the three months to September, contributing 0.5 of a percentage point to the drop. Manufacturing fell 3.9% during the quarter, also contributing 0.5 percentage points to the fall. Transport, storage and communication decreased 5.4%.

Measured on an expenditure basis, GDP shrank 0.3%, with household final consumption expenditure growing 0.2% in the third quarter. Declines were seen in imports, which fell 6.8%.

The GDP figures come after warnings by ratings agencies S&P Global Ratings and Moody’s Investors Service on SA’s weak growth, rising government debt and ailing state-owned entities. Both changed their outlook on SA debt to negative in November.

Last week, the International Monetary Fund (IMF) said SA urgently needed to implement the reforms outlined in finance minister Tito Mboweni’s economic strategy paper, to boost growth and address rising unemployment and inequality.

Ahead of the release, high-frequency data had indicated that growth in the third quarter would disappoint. Economists have also warned that the final three months of 2019 might also disappoint.

In the third and fourth quarters, there has been little evidence that growth will pick up, PWC economist Christie Viljoen told Business Day ahead of the release of the figures, as business and consumer confidence remained in negative territory.

“To be honest, there isn’t much to be excited about that would differentiate the fourth from the third quarter,” Viljoen said.