JOHANNESBURG - South Africa’s economy got off to a relatively strong start in the first quarter, with GDP growing by 0.5 percent.
While the increase may appear modest, Standard Bank Group Head of South Africa Macroeconomic Research, Dr Elna Moolman, says it could signal better growth prospects ahead.
"If the economy continues at this pace, it will record around 2 percent growth for the full year," she says.
Finance, agriculture, trade and transport were the main contributors to growth on the production side of the economy.
On the expenditure side, growth was supported by a decline in imports and increases in household consumption, government spending and exports.
The finance industry was the largest positive contributor on the production side, expanding by 0.9 percent and contributing 0.2 percentage points to overall GDP growth.
According to Moolman, the first-quarter expansion was supported by favourable weather conditions.
This resulted in robust growth in the agricultural sector, by far the strongest-performing industry during the period. Trade, transport and communication also made notable contributions.
Manufacturing, however, contracted by 0.8 percent. This marked the sector’s second consecutive decline, driven mainly by weaker performance in the petroleum and chemicals, iron and steel, and wood, paper and publishing divisions.
While many analysts had forecast growth of 0.4 percent, the outcome exceeded expectations.
South Africa’s working-age population is growing at about 1.2% year-on-year. Moolman says it is encouraging that economic growth is outpacing population growth.
"This means that we should, on aggregate, be better off," she says.
If sustained, 2 percent economic growth should be accompanied by employment growth of between 1 percent and 1.5 percent.
However, Moolman says the economy needs to grow at a stronger pace to encourage firms to hire more workers.
With continued global uncertainty and the conflict involving Iran, there are concerns that growth momentum could weaken.
"The uncertainty itself is a significant deterrent for firms to expand capacity," she says.