South Africa dodges recession as GDP grows 0.4%

South Africa, the most industrialised economy in Africa, skirted a technical recession as its GDP expanded by 0.4 percent in the first quarter of this year, new official data released today show. 

The country’s GDP had contracted by 1.1 percent in the fourth quarter of last year amid worsening power outages. 

Analysts at UK-based Capital Economics, however, said the country’s outlook remains bleak. 

“Severe power cuts, tight fiscal and monetary policy and a worsening external backdrop mean that the economy is likely to merely stagnate this year,” they said in a note. 

The analysts said the production breakdown showed that nearly all sectors of the economy expanded in Q1. The exceptions were agriculture, where output declined by 12.3 percent q/q, and utilities, reflecting the effects of lower electricity generation, they said.

Capital Economics said, “While the economy may have dodged a technical recession, more timely indicators suggest that the economy is lacking momentum. The monthly activity figures suggest that consumer spending struggled towards the end of Q1. And the manufacturing PMI edged down in May, leaving it consistent with falls in output in the sector.

“And the outlook remains bleak. An end to the energy crisis is nowhere in sight. And there are growing fears that power cuts are adding to price pressures which is likely to prompt the central bank to keep policy tight for longer. Austerity will remain a headwind and external demand will be weak over the coming quarters.”