In light of the GDP figures released on 25 May 2010, which indicated that growth accelerated further to 4.6% in 2010q1 (from 3.2% in 2009q4), this short note provides a brief analysis of the implications for GDP growth in calendar 2010 as well as for the South African Government’s Budget Review growth forecast.
All sectors expanded in the first quarter, but Manufacturing (8.4%), Mining (15.4%) and Finance (2.5%) were particularly strong and contributed 1.3%, 0.8% and 0.5% respectively to first quarter growth, while Trade and general government services each contributed 0.4% to growth. Agriculture grew by 3% (first expansion since 2008q4), but construction continued to moderate and grew by only 2.1%.
The quarterly growth figure came in above the Bloomberg median consensus forecast of 4.3%, and may result in a series of forecast upgrades as the recovery seems to have gained stronger traction than initially anticipated. Although the debt crisis in high-income Europe poses a new challenge for the global recovery, it has not (yet) had a measurable impact on global output. On the other hand, the Soccer World Cup is expected to provide a further boost to growth over the near term.
The table below provides the possible growth outlook for 2010 given different scenarios for quarter-on-quarter growth (all at annualised rates). For example, should the economy register no further growth (0%) during the course of the year, annual growth will come in at 1.7%. In a scenario where quarterly GDP growth averages 2% and 3% over the next three quarters, GDP growth for calendar 2010 will be 2.4% and 2.8% respectively.
Source: DECPG staff estimates.
Notes: Growth numbers are Q-o-Q, seasonally adjusted and annualised.
To achieve 2.3% growth (South African Government’s Budget Review forecast) in calendar 2010, quarterly growth rates of as low as 1.6% over the remaining three quarters of 2010 will be required. In all likelihood, this target may be easily surpassed.
A more optimistic (yet entirely plausible) scenario may be where quarterly growth rises to around 5½% in the second quarter (due to Soccer World Cup) and then declines to around 2% in the third quarter (as growth will be measured from a high second quarter base). If growth than rebounds to around 3% - 4% in the final quarter of the year, real GDP growth may come in at just above 3% in calendar 2010.
Hopefully these positive GDP developments will also further inspire Bafana Bafana and that these statistics are merely a precursor to many more pleasant surprises (well I guess that depends on which team you support)...