South Africa’s economic growth was lower at a real seasonally adjusted, annualised rate of 0.9 percent in the first quarter of 2013 compared with 2.1 percent in the fourth quarter of 2012.
He says the bank expects real GDP growth of 2.3 percent in 2013 and interest rates are expected to remain unchanged at current levels throughout 2013 before rising around mid-2014 to keep inflation under control.
This lower growth came against the background of global economic trends as well as a contraction in the real value added in the manufacturing, agriculture and electricity sectors, whereas mining production improved in the quarter, explains Jacques du Toit, Absa Home Loans property analyst.
He says the bank expects real GDP growth of 2.3 percent in 2013 and interest rates are expected to remain unchanged at current levels throughout 2013 before rising around mid-2014 to keep inflation under control.
This growth will be driven by global economic trends and the resultant demand for exports, as well as domestic demand and other developments on the economic front.
Both the South African Reserve Bank (SARB) and the International Monetary Fund (IMF) forecast domestic real GDP growth at 2 percent in 2013.
“Banks’ prime lending and variable mortgage interest rates remained unchanged at 8.5 percent per annum up to July this year – their lowest level in 40 years, supporting the repayment of debt and the affordability of credit,” notes Du Toit.
He says inflationary pressures persist on the back of rising fuel prices and a weak exchange rate, with inflation averaging just below 6 percent in the first half of the year.
“Absa’s forecast is for headline consumer price inflation rate to rise to above the 6 percent level in the second half of the year, before tapering off to between 5.5 percent and 6 percent on average in 2014.”
SARB expects headline consumer price inflation rate to average 5.9 percent in 2013 and 5.5 percent in 2014, with core inflation forecast at 5.3 percent in 2013 and 5.2 percent in 2014, he says.
Du Toit notes that consumers were financially constrained in the early months of 2013, with growth in real household disposable income and consumption expenditure slowing down further.
Banks’ prime lending and variable mortgage interest rates remained unchanged at 8.5 percent per annum up to July this year – their lowest level in 40 years, supporting the repayment of debt and the affordability of credit, notes Du Toit.
“Savings remained low, the number of credit-active consumers with impaired credit records rose further and consumer confidence was at a nine-year low in the first quarter of the year,” he says.
Global economy
According to IMF, global economic growth showed only marginal improvement from a real annualised rate of 2.5 percent in the second half of 2012 to 2.8 percent in the first quarter of 2013.
Du Toit says economic growth in major emerging market and developing economies remained low on the back of infrastructure and capacity constraints, slow growth in the demand for exports, and declining commodity prices.
The Chinese economy recorded slower-than-expected growth, although still growing at double the rate of output in the global economy while the pace of expansion in advanced economies remained low into the early stages of 2013.
The Eurozone continued to experience recessionary conditions in response to low levels of demand and confidence in the wake of developments in Cyprus, while tight fiscal and financial conditions remained a constraining factor to economic growth, he says.
Meanwhile, the pace of economic expansion in the US economy was impacted by fiscal contraction, which led to subdued private sector demand and the Japanese economic growth improved in the first quarter of the year, supported by domestic consumption and exports.
Du Toit points out that consumer price inflation remained largely under control globally, especially in advanced economies, affected by continued relatively low levels of demand and lower commodity prices.
As a result of these developments, monetary policy remained accommodative in most countries, he adds. – Denise Mhlanga
