SA’s economy managed to eke out paltry growth in 2019, despite a steep contraction in the fourth quarter, which led to a recession being declared for the last half of 2019.
Data released by Stats SA on Tuesday shows that for the full year, the economy managed growth of just 0.2%, down from 2018’s 0.8%. This marks the sixth consecutive year that SA’s economy has grown below 2% and the lowest level since 2009, said to Stats SA.
The economy shrank 1.4% in quarter four, from a revised contraction of 0.8% in the previous quarter, pushing SA into a technical recession (defined as two consecutive quarters of contraction) in the last half of 2019.
At these levels the economy is not growing at the pace needed to keep up with population growth, which is at about 1.4% a year, meaning GDP per capita will decline and South Africans will become poorer.
The outcome is lower than the growth rates predicted for 2019 by the Reserve Bank (0.4%) and the Treasury (0.3%).
The outcome is also well below revisions to growth forecasts made by a number of multilateral agencies, including the International Monetary Fund (IMF), which had expected t 0.7% growth.
The economy has been hit hard by power cuts, which began in earnest in December and are expected to continue for the next 18 months. Struggling power utility Eskom, which has battled operational difficulties and requires regular financial support from the fiscus, has been identified as a key threat to SA’s economy. At the same time, consumer and business confidence has languished, weighing on household spending and private sector investment.
The quarterly contraction was widespread, with almost all industries in the primary, secondary and tertiary sectors slowing. The only growth was recorded by the finance, mining and personal services sectors.
On the expenditure side of the economy, growth contracted 1.2% in the fourth quarter, deeper than a revised 0.4% decline in the third quarter. A key contributor to the decline was a sharp 10% decline in gross fixed capital formation, which is seen as an indicator of fixed investment in the economy. Annually, expenditure on GDP grew just 0.1% for the full 2019 year.
To add to SA’s internal woes, the global economy is grappling with the potential economic effects of the coronavirus outbreak, which began in Wuhan, China.
On Monday, the Organisation for Economic Co-operation and Development (OECD) warned that if the spread of the virus is not sufficiently contained, the pace of global growth could halve.
The OECD cut its expectations for growth in China, an important consumer of South African commodities and a major trading partner, to below 5% in 2020.