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The SA Daily 04 December 2019

Q3 GDP fails to perform

Shireen Darmalingam

  • Q3:19 GDP contracted by -0.6% q/q (saar), even less than the expectation of growth stalling around 0.0% q/q (saar). On an annual basis, growth moderated to 0.1% y/y, from 0.9% y/y in Q2:19. Q3 had to contend with Eskom’s poor finances, weak business confidence, and an unemployment rate rocketing to a highest level in 11 years.
  • Six of the 10 sectors contracted in Q3:19, with the biggest decline coming from mining (-6.1% q/q), transport (-5.4% q/q), and utilities (-4.9%). Agriculture and construction too contracted further in Q3:19, which signals a recession in both these sectors.
  • Encouragingly, the trade sector and general government services sector posted growth of more than 2% q/q in Q3:19— even though this was a moderation from Q2:19.
  • We forecast GDP growth of just 0.4% for 2019 and 1.0% for 2020; the 2020 estimate though is premised on growth-supportive interventions by government.
  • However, underlying economic weakness and poor confidence as well as slack progress with policy reform persist, as does SA’s extremely concerning fiscal prognosis. This situation is also being exacerbated by the risk of a sovereign downgrade next year.

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