Momentum Investments have released their research note titled, Uptick in quarterly growth rounds off 2021 growth at 4.9%, prepared by the Momentum Investments Macro Research Team.
Please see below, a summary of highlights from the team, as well as a downloadable PDF of the research paper.
Highlights:
Growth slowed to 1.7% in year-on-year (y/y) terms in the fourth quarter of 2021 from 2.9% in the third quarter, leaving full-year growth at 4.9% from a 6.4% contraction the year before.
The economy expanded by 1.2% on a quarter-on-quarter (q/q) seasonally-adjusted (s/a) basis, which was slightly higher than the Thomson Reuters median consensus forecast of 1.1%. This leaves economic activity at the same level as experienced in the second quarter of 2017.
Real growth in the economy has averaged a dismal 0.4% for the past five years and 1% for the last decade, which is significantly lower than the 1.5% average rate of growth in the South African (SA) population for the same period.
The largest contributions to full-year growth, based on the production method, came from financial and personal services. Meanwhile, activity in the government, utilities and construction sectors added the least to the full-year growth number.
Based on the expenditure method, the largest contributors to growth arose from household consumption and exports, while imports detracted the most.
Although stronger-than-anticipated global growth, sustained commodity prices, a quicker bounce-back in pandemic-hit sectors and faster momentum on local economic reform pose upside risks to growth in the local economy, higher global inflation (exacerbated by intensifying geopolitical conflict), a potential hard landing in China (triggered in the property market), less accommodative monetary policy, fiscal consolidation, structurally high unemployment and local energy supply shortages continue to raise notable downside risks to growth.
We expect growth to slow to 2% in 2022 and 1.8% in 2023. The Ukranian crisis, in our view, is likely to have a reasonably limited effect on local growth given a rebound in the country’s terms-of-trade and weak direct trade and investment linkages with Russia and Ukraine. Meanwhile, we have revised our headline inflation forecast higher to 5.2% for 2022 to reflect higher international oil prices. The risk to near-term inflation remains firmly to the upside given potential sanctions on the Russian oil market.
Our structural view on growth remains impeded by subdued confidence, low levels of investment, fiscal strain and lingering unemployment. Treasury outlined a potential upside scenario to growth in which real economic activity is 0.7% higher than in the baseline by 2024. This scenario, nevertheless, relies heavily on the faster implementation of structural economic reforms to foster a more robust economic outlook.
Download the full report, click below…
ENDS