South Africa’s economy was stronger than expected in the first quarter of 2022, with the gross domestic product (GDP) growing by 1.9% from the previous quarter.
The size of the economy is now at pre-pandemic levels, with real GDP slightly higher than what it was before the Covid-19 pandemic, Statistics South Africa said on Tuesday.
Last year, the South African economy grew by 4.9% as it started to recover from a 6.4% slump in 2020 due to pandemic-related lockdowns.
Manufacturing leads the way
On the production side of the economy, eight out of the ten industries recorded positive growth in the first quarter, with manufacturing the key performer.
The manufacturing sector saw strong growth of almost 5% in the first quarter, driven by a rise in the production of petroleum and chemicals, food and beverages, and metals and machinery.
“Finance, real estate and business services, as well as trade, also made sizable positive contributions to GDP growth. Trade activity was buoyant in the first quarter, with positive results from wholesale, retail, motor trade, and catering and accommodation.
“After a strong fourth quarter, agriculture growth was more subdued in the first quarter, edging higher by 0,8%. The rise in the first quarter was mainly underpinned by increased horticulture production,’ said Stats SA.
The construction and mining activity declined compared to the previous quarter.
“Mining output was lower, mainly due to a pullback in the production of platinum group metals, iron ore and gold. Construction saw its fourth consecutive quarter of contraction, with underwhelming results reported for residential buildings and construction works. Economic activity related to non-residential buildings, however, increased in the first quarter.”
Household consumption increased by 1.4% in the first quarter, with a sharp 6.5% increase in spending on restaurants and hotels.
Imports were boosted by a rise in demand for motor vehicles, parts and accessories; mineral products; and animal and vegetable fats. The economy also recorded a rise in exports, mainly driven by increased trade in motor vehicles, parts and accessories; mineral products; and machinery and equipment.
The automotive sector plays an important role in both export and import markets, as outlined in a recent article that tracks the flow of products through the South African economy.
Second-quarter GDP is expected to be hit by the impact of flooding in KwaZulu-Natal and increased load shedding, as well as the knock-on effects of the Ukraine invasion, particularly higher food and fuel prices. In addition, higher interest rates are also expected to weigh on growth.
The SA Reserve Bank expects growth of 1.7% this year.
According to Business Tech, the release only covers the first quarter of the year, meaning that the economic impact of the devastating floods in KwaZulu-Natal, which occurred during the second quarter in April, will only reflect in the GDP results due for release in September.
The release also largely ignores South Africa’s recent intense round of load shedding – which primarily occurred in March and April.
Additional Source: Business Tech, Fin24
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