GDP figures for the fourth quarter of 2021 due on Tuesday are expected to show that the economy rebounded from the social unrest-induced contraction of the third quarter.
According to a Bloomberg consensus, the data is broadly expected to show a rebound to a predicted rise of 1% quarter on quarter and a 1.5% rise year on year from the 1.5% quarter-on-quarter contraction in the third quarter.
Analysts are concerned about the near-term economic effect of the ongoing Russia-Ukraine conflict, global tightening financial conditions and the unresolved domestic power supply disruptions. They remain positive that commodity exporters such as SA could benefit from elevated commodity prices and new market opportunities.
In their weekly release, FNB economists said their expectation is for GDP growth of 1.1% quarter on quarter seasonally adjusted and 1.7% year on year non-seasonally adjusted, slightly above the Bloomberg consensus. They add that the economy is likely to have rebounded by 4.7% in 2021 from a pandemic-induced contraction of 6.4% in 2020.
FNB chief economist Mamello Matikinca-Ngwenya said while the SA economy has been recovering since its near collapse in the second quarter of 2020, the recovery has been uneven across the different sectors.
“Encouragingly, labour income recovered swiftly and largely supported consumer spending on retail trade goods,” she said, adding that FNB predicts the economic rebound in the fourth quarter will be led by the trade sector, followed by the manufacturing, agriculture and financial services, real estate and business services sectors. She warned that mining and electricity, as well as the water and gas sectors are expected to have limited the growth rebound based on their respective poor performances in that quarter.
Structural health
Matikinca-Ngwenya said while FNB is particularly encouraged by the reasonably strong economic cyclical rebound in 2021, it remains concerned about the underlying structural weaknesses that prevailed prepandemic.
“The growth rebound would have been more robust had the structural health of the economy been more vigorous before Covid-19,” she said.
Global accelerating inflation also remains a major growth concern for SA and other emerging economies.
Citadel Global director Bianca Botes said while many argue that the war in the Ukraine might deter the US Federal Reserve from hiking interest rates, the Bank’s chairperson, Jerome Powell, made it clear last Wednesday that the Bank will proceed with its plan to hike rates in March.
“Powell said he was ready, if needed, to use larger or more frequent rate moves if inflation does not slow, and may over time need to push rates to more restrictive levels of above 2.5%.
“This would slow economic growth rather than simply stimulating it less robustly,” Botes said.
US inflation is now triple the Federal Reserve’s 2% target and has become a prime political concern for the Biden administration and members of the US Congress. Powell also noted that the price pressures were “not as transitory as we had hoped” and that “other mainstream economists and central banks around the world made the same mistake”.
But it is not all bad news. Commodity exporters such as SA are expected to benefit from elevated commodity prices and new market opportunities due to the Ukraine-Russian crisis.
The prices of SA’s major export commodities increased in the fourth quarter 2021 compared with the previous quarter.
Matikinca-Ngwenya warned that the extent to which SA’s commodity export volumes benefit will depend on various factors, including the state of global supply chains, domestic port efficiencies, production costs and the global economic trajectory.
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