Economists expect decline in GDP for Q4 of 2019

South Africa's GDP is expected to record a contraction when Statistics South Africa on Tuesday morning releases growth figures for the fourth quarter of 2019.

The figures comes as the country is experiencing intermittent power cuts from Eskom, following the surprising return of load shedding in October.

The impact of load shedding, which the power utility says is likely to remain for approximately the next year and a half, is likely to severely impact productivity in the already ailing economy, which is projected to grow by a measly 0.8%, according to the IMF.

South Africa's economy is facing several headwinds, including the low business and consumer confidence as well as the risk of a sovereign credit downgrade by Moody's - the only ratings agency which has not lowered the country's status to sub-investment grade. 

Moody's is due to release its assessment of the country on March 27.

The economy shrank by 0.6% in the three months to end-September last year, and economist at FNB predict a 0.1% seasonally adjusted decline "highlighting that the economy may well have entered a recession". South Africa last entered a recession in the second quarter of 2018.

"This will bring our 2019 full-year GDP growth estimate to just 0.3%, notably lower than the 0.8% increase recorded in 2018," read a note from FNB.

The sectors which are mostly impacted by load shedding such as manufacturing and mining to report low activity. 

"Overall, economic growth remains lacklustre and only structural reform will be able to lift potential growth meaningfully over time."

Treasury expects the economy to grow by just 0.3% in 2019.

Load shedding impact

In December, the Minerals Council of South Africa, which represents 90% of the companies in SA's industry, said its member mines had been told by Eskom to reduce their loads by 20%, as the state-owned power utility intensified load shedding to stage 6 for the first time.

Petra Diamonds took a decision to halt operations at three of its mines - Cullinan, Finsch and Koffiefontein following the Eskom request to reduce consumption.

Mining and manufacturing are the key drivers of economic growth and a slump in their activity is likely to have a negative impact.

Investec have forecast a -0.1% decline in GDP, citing "extensive load shedding" at the end of the fourth quarter, while economists polled by Bloomberg foresee a 0.2% contraction.

A contraction is likely to pile more pressure on the government to come up with growth stimulating reforms, as indicated by global lenders. 

In his budget speech, Finance Minister Tito Mboweni, announced a plan to slash the state's wage bill by R160.2 billion over three years, amid warning about its impact on the fiscus. The intervention has, however, been met with resistance from trade unions.

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