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GDP shock as SA economy shrinks 1.3%

South Africa’s economy shrank by 1.3% in the fourth quarter, much worse than economists expected.

It is also the largest contraction since the third quarter of 2021, when deadly riots in KwaZulu-Natal and Gauteng caused massive economic disruption.

Economists polled by Reuters expected GDP to shrink by only 0.4% for the last quarter of 2022.

Seven of the 10 South African industries contracted in the last three months of 2022, Statistics SA reported on Tuesday. Record levels of power outages took a heavy toll, with only two days without load shedding in the whole quarter. Over half of the quarter’s load shedding was Stage 3 and above.

“These paralysing disruptions hurt output and sales in all industries while driving up production costs across the board,” the Nedbank Group Economic Unit said. Aggressive interest rate hikes also hit the economy.

The finance, real estate and business services sector – the largest industry in South Africa – shrank by 2.3% in the fourth quarter of last year. This subtracted 0.6 of a percentage point from GDP growth.

Agriculture contracted by 3.3% due to weaker performances from field crops and horticulture products.

Source: Statistics SA


The trade, catering and accommodation industry shrank by 2.1%, while mining output was also lower, due to a decline in the production of diamonds, iron ore and platinum group metals. The mining industry has been hit hard by Transnet’s rail woes.

For the year, GDP increased by 2.0% – below the consensus of 2.2%.

Source: Statistics SA

Although GDP reached an all-time high in 2022, the economy has only grown by 0.3% from 2019. “This lags behind the 3.5% rise in the country’s population over the same period,” Statistics SA noted.

Six industries have yet to recover to their pre-pandemic levels of production.

“Construction is the worst in shape, remaining 23.1% smaller than what it was before the pandemic,” Statistics SA said.

Source: Statistics SA

The economy grew by 1.8% in the three months to end-September after shrinking by 0.7% in the second quarter, which was affected by the KwaZulu-Natal floods. –