Johannesburg - South Africa’s economic growth slowed in
the third quarter as factory output and trade contracted, complicating the
government’s task of boosting output to avoid a possible credit-rating
downgrade to junk next year.
Gross domestic product expanded an annualized 0.2 percent
in the three months through September compared with upwardly revised growth of
3.5 percent in the preceding quarter, the statistics office said in a report
released on Tuesday in Cape Town. The median of 19 economist estimates compiled
by Bloomberg was for 0.6 percent growth compared with unrevised expansion of
3.3 percent in the second quarter. The economy expanded 0.7 percent from a year
earlier.
S&P Global Ratings last week affirmed the nation’s
BBB- assessment, the lowest investment-grade level, while warning that
political turmoil has distracted from reforms to boost growth. The economy will
probably expand at the slowest pace this year since a 2009 recession. Slow
growth will make it more difficult for Finance Minister Pravin Gordhan to meet
his pledge to narrow the budget deficit to 2.5 percent of GDP by 2020, from a
projected 3.4 percent this year, and to limit government debt, according to
Nicky Weimar, an economist at Nedbank.
“The only conclusion you can draw from a 0.2 percent
growth rate is that there is no momentum and it seems to suggest there is very
little underlying confidence,” Weimar said by phone. Ratings companies want to
see “that we start to implement the sort of policies that will get us to a
faster growth rate,” she said.
Factory output, which makes up about 13 percent of GDP,
contracted by an annualized 3.2 percent from the previous quarter and trade
shrank by an annualized 2.1 percent, the statistics office said. Mining
production rose 5.1 percent and the finance industry expanded by 1.2 percent.
Gordhan, 67, has been leading efforts to avoid a cut to
junk while wrangling with President Jacob Zuma over control of the Treasury and
state-owned companies. That and delays in passing new mining and anti-money
laundering laws and a failed attempt by senior African National Congress
officials last week to oust Zuma have fueled perceptions of political turmoil
and policy uncertainty.
High unemployment
Low commodity prices, the worst drought in more than a
century and weak export demand have weighed on output and the economy will
probably expand 0.4 percent this year and 1.2 percent in 2017, according to the
central bank. That won’t create the jobs required to reduce the nation’s 27
percent unemployment rate, Governor Lesetja Kganyago said on November 30.
“It’s certainly not enough growth to assist with the
social issues like unemployment or income growth and this will keep ratings
agencies nervous about the country’s rating,” Kevin Lings, chief economist at
Stanlib Asset Management Ltd. in Johannesburg, said by phone. “It’s clear that
South Africa is facing a crisis in economic activity.”
The rand gained 0.6 percent to 13.6511 per dollar by
10:37 a.m. in Johannesburg on Tuesday. Yields on rand-denominated government
bonds due December 2026 fell three basis points to 8.95 percent.
BLOOMBERG