AGRICULTURE AND FINANCE HELP LIFT SA OUT OF RECESSION

The following article is an excerpt from our September 2017 newsletter:

After two consecutive quarters of decline, the South African economy spluttered back to life in the second quarter of 2017. Positive contributions to higher economic activity across most industries – agriculture, finance, and mining – lifted the gross domestic product (GDP) by 2,5% quarter-on-quarter.

Agriculture continued to show strong recovery from South Africa’s recent drought, increasing production by 33,6%. The rise in the second quarter was mostly driven by a rise in the production of field crops, maize, and wheat, as well as increased production of horticulture products such as vegetables.

The 2,5% rise in GDP ends South Africa’s second recession since 1994. However, there are a few statistical points to note. Firstly, quarterly growth rates can be quite volatile. Secondly, the headline figure of 2,5% is the growth rate after annualisation, in other words, what the annual growth rate would be if the quarterly rate were to be repeated for four consecutive quarters. Thirdly, if we compare the first half of 2017 with the first half of 2016, the growth rate was 1,1%.

Although the headline figure is the most publicised in the media, the key lesson is that it should not be used in isolation. There are other GDP indicators that complement the headline figure and taken together they provide a more comprehensive picture of economic performance.

So even though 2,5% might seem like an impressive recovery, longer-term indicators show subdued growth. As a nation, the goal of achieving and sustaining higher rates of economic growth and development remains just as important as ever.

Visit our Newsletters page for more useful information.

Comments are closed.