The South African economy grew by 1,9% last year, compared to a 3,6% expansion recorded in 2002, Statistics SA reported yesterday.

In the fourth quarter of last year, the seasonally adjusted real Gross Domestic Product (GDP) rose by 1,3% compared with the previous quarter.

The corresponding real annualised economic growth rates for the first three quarters of last year were 0,9, 0,5, and 1,1% respectively.

Stats SA said contributors to increased economic activity last year included transport and communication (0,7 of a percentage point), finance, real estate and business services (0,5 of a percentage point), and wholesale trade, retail, hotels and restaurants (0,4) industries.

It said that the seasonally adjusted real value added by non-agricultural industries increased by annualised rates of 1,1%, 1,4%, 2,1% and 1,7% in the first, second, third and fourth quarters of 2003 compared with the fourth quarter of 2002 and the first, second and third quarters of 2003.

Stats SA's manager for national accounts, Joe de Beer, said the annual real value added by agriculture decreased by 5,9% in 2003 compared with 2002.

"The annualised decrease can be attributed to lower harvest of field crops, mainly maize and horticultural products," he said.

He said 90% of the effect of the drought were absorbed by these figures.

Others believe this rate may only be 70%.

The mining and quarrying industry increased its annual real value added by 2,5% in 2003 compared with 2002.

De Beer said the adjusted real value added by industry for the fourth quarter of 2003 increased by 2,8% compared with the fourth quarter of 2002.

Commenting on the results, Hurald Wagner of the Reserve Bank's national accounts division said the lower than expected results could not be fully blamed on the strong rand.

"Global increase in demand as well as an increase in the commodity prices should go a long way in neutralising the effect of the strong rand," he said.

John Loos, Absa economist, said the fourth quarter South African GDP showed stronger growth than in the previous quarter, reflecting the positive effects of the series of interest rate cuts in the second half of last year, and a gradually recovering global economy.

"However, while signalling a strengthening economy, the quarter-on-quarter annualised growth rate of 1,3% remains modest, constrained by the ongoing presence of a strong rand as well as the drought that has hampered agricultural performance".

The manufacturing industry increased by one percent in 2003 compared with 2002, and the annual real value of the electricity and water industry increased by 2,3%.

The wholesale and retail trade, hotels and restaurants increased by 2,9%, transport and communication by 6,2%, finance, real estate and business services by 2,9%, community, social and personal services by 4,6% and general government services increased by 0,7%.

Loos said the National Treasury's GDP growth projection of 2,9% for this year may be optimistic.

"While further recovery is expected, agriculture performance may still take some time to get back to full strength given the recent drought conditions. Absa's forecast remains 2,4 percent real GDP growth for 2004, and 3,1 percent in 2005," he said. – Sapa.