By Helmo Preuss

In contrast to most other forecasts, the National Association of Automobile Manufacturers of South Africa (NAAMSA) expects gross domestic product (GDP) growth to continue to slow to 2.2% next year from 2.5% this year and 3.0% last year.

The South African National Treasury on November 12 forecast real GDP growth of 3.3% in 2004, 3.7% in 2005 and 4.0% in 2006.

Despite the slowdown in 2004, NAAMSA expects South African manufacturers to produce 6.9% more units next year at 454,100 units than this year, while the South African vehicle market is expected to grow by 8.4% to 415,500 units in 2004.

This seeming contradiction of slowing GDP growth yet strong vehicle production and markets is not without precedent.

In 2001, when GDP growth eased to 2.8% from 3.5% in 2000, South African manufacturers produced 13.7% more units in 2001 than in 2000, while the South African new vehicle market expanded by 7.9%.

Skeptical economists place more trust in the NAAMSA data, which count actual units, rather than the more ephemeral "real value added" estimated by Statistics South Africa (Stats SA).

They believe that the 2001 GDP growth rate is under-stated and are eagerly awaiting next year's rebasing exercise, which moves the base year for GDP data from the current 1995 to 2000.

The last rebasing exercise, in 1999, lifted the annual average growth rate between 1993 and 1998 from 2.7% to 3.1%.

Stats SA revises the GDP numbers every year in November using more comprehensive economic and socio-economic information, such as annual reports, company financial statements, and results of household surveys.

These sources are a more reliable barometer of economic activity than those used for the quarterly GDP figures, which are generally revised upward as a result.

In November 2002 real GDP growth for 2001 was revised up to 2.8% from the original estimate of 2.1%, while the quarterly growth estimates for the previous ten quarters were revised up by an average of 0.6 percentage points per quarter.

The rebasing exercise in 2004 will bring a number of important developments concerning GDP measurement.

From January 2004, Stats SA will start using an updated business register to gauge economic activity.

Stats SA has admitted that the register currently in use suffers from significant undercoverage of industry, especially in view of the structural changes since 1995.

The updated register, based on Value-Added Tax (VAT) registrations and other sources, should help to capture activity more accurately in areas such as manufacturing, retailing, and wholesale trade, which in turn will help to improve the coverage of the GDP statistics.

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