Improved Growth Figures Reflect Resilience, Yet Volatility Persists

The better-than-expected gross domestic product (GDP) growth of 0,6% in the second quarter of 2023 is welcome news, as it has extended its gains for a second consecutive time.

Prof Raymond Parsons, economist from the North-West University (NWU) Business School, says this demonstrates a noteworthy degree of resilience in the economy. This has mainly been the outcome of more moderate Eskom blackouts in June compared with April and May, together with other mitigating factors that helped to generate better growth figures.

“Nonetheless, there remains a high degree of volatility in the growth dynamics. This is apparent in the wide divergence in growth forecasts for the second quarter of 2023, ranging from 0,1% to 0,7%.”

According to Prof Parsons, it is a reflection not only of the difficulties in quantifying the biggest supply obstacles in the economy, but also of being a significant source of uncertainty in growth expectations.

“For now, the balance of risks to growth prospects remains on the upside. Loadshedding in early September is already back to Stage 6, illustrating the extent to which Eskom blackouts hold South Africa’s growth performance hostage. In addition, other economic data – such as retail sales and credit demand – remains weak as a result of higher borrowing costs and rand depreciation, which cut disposable income.”

He says the economy still struggles to gain sufficient momentum to sustain a higher rate of job-rich growth.

“A growth outlook of less than 1,0% for 2023 as a whole – with not much better rates expected in 2024 – has immediate negative implications for fiscal sustainability, as tax revenues fall short of projections and government spending exceeds planned budget levels,” Prof Parsons concludes.