The contribution of South Africa’s mining and manufacturing sectors is likely to remain weak in 2012, Absa Capital argued in its latest quarterly economic outlook, in which the bank also cut its growth outlook for next year from 3.6% to just 2.8%.

It also cut its growth expectation for 2011 from 3.1% previously to 3%, in line with its expectations of lower growth in the rest of the world.

Lead South Africa economist Gina Schoeman indicated that the two key productive sectors had been proved to be a material drag on country’s growth performance during the second and third quarters of 2011.

Gross domestic product (GDP) growth during the third quarter was heavily affected by a 17.4% quarter-on-quarter contraction in mining and would have been closer to 4% than 1.4% had mining and manufacturing been excluded. Similarly, the GDP figure for the second quarter would have been significantly higher had it not been for an 8.8% contraction in manufacturing during the period.

The outlook for 2012, Schoeman added, was clouded further by persistently poor confidence levels, as well as by the uncertain business environment, which was expected to crimp investment. Therefore, the Barclays affiliate was “sceptical” on the outlook for fixed investment, which proved robust in the third quarter, expanding by 5.6%.

In addition, macroeconomist Jeffrey Schultz said a recession in Europe, which the bank expected would be “mild”, posed a material downside risk to companies exposed to the export market. The European market consumed about 29% of South Africa’s manufactured exports and 29% of it mining exports.

But an increasingly large export exposure to the rest of Africa and to Asia could offer some respite. Currently, Africa accounted for a significant 27% of the country’s manufactured export, while Asia, consumed about 58% of South Africa’s mineral exports.

As with 2011, the domestic consumer was likely to provide the main growth impetus into 2012, even though consumer confidence was identified as a risk, particularly in light of higher inflation.

Absa Capital expected food prices to drive inflation higher in 2012, during which it expected the consumer price index to peak at 6.7% in the second quarter. It also expected inflation to remain above the 3% to 6% target band until the second quarter of 2013.

Nevertheless, it was not expecting a rate hike during the first three quarters of 2012, as the South African Reserve Bank sought to manage the downside growth risks against the upside inflations risks.