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SA narrowly avoids a recession

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SA narrowly avoids a recession

South African rand
Photo by Reuters

6th June 2023

By: News24Wire

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Despite record levels of loadshedding and aggressive rate hikes, South Africa's first-quarter Gross Domestic Product (GDP) grew by 0.4%.

This was exactly in line with economists' consensus forecast, according to a Thomson Reuters poll.

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The economy shrank by a revised 1.1% in the fourth quarter of 2022. Growth in the first quarter means South Africa avoided a technical recession, which is defined as two consecutive quarters of a shrinking economy.

While the South African economy is now slightly bigger than before the Covid pandemic, it still remains below its peak in the third quarter of last year.

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The South African Reserve Bank previously estimated that loadshedding will shave two percentage points off GDP growth this year. The bank's aggressive rate hiking cycle - 475 basis points over 18 months – is also restricting the economy.

Still, the manufacturing industry continued to grow (1.5%), with food and beverage output expanding the most in the first quarter.

The finance, real estate and business services industry (+0.6%), personal services industry (+0.8%) and the transport, storage and communication industry (+1.1%) also saw growth.

However, agriculture slumped by 12.3%, weighed down by a decline in the production of field crops and animal products, Statistics SA said. The motor trade also recorded a decrease in economic activity.

 

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