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SA economic growth slows to a mere 1.9%

Posted On Wednesday, 25 February 2004 02:00 Published by
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The economy grew at its slowest rate since 1998

February 25, 2004

By Quentin Wray

Pretoria - The economy grew at its slowest rate since 1998, and its second slowest rate in more than a decade, in 2003 as the strong rand hammered manufacturers and the weather played havoc with farm production.

The first official estimates of 2003 gross domestic product (GDP), released yesterday by Statistics SA, showed growth at only 1.9 percent last year, compared with 3.6 percent in 2002 and 2.7 percent in 2001.

The non-agricultural economy grew 2.2 percent last year, Stats SA said. Stripping out cyclical factors and annualising the data, Stats SA said GDP grew at a less-than-expected 1.3 percent in the fourth quarter from 0.9 percent, 0.5 percent and 1.1 percent in the first three quarters.

This small pick-up signalled the economic slowdown had bottomed out and boded well for the outlook for 2004 and beyond, economists said.

Independent economist Noelani King Conradie said factors that would contribute to better growth this year and the next included the improving outlook for the US, European and Japanese economies, increased government spending and the continued effect of last year's rate cuts.

Finance minister Trevor Manuel estimates the economy will grow 2.9 percent this year, 3.6 percent in 2005 and 4 percent in 2006, while private sector economists polled by Reuters are more pessimistic, putting growth at 2.7 percent this year, 3.3 percent in 2005 and 3.4 percent in 2006.

The main culprit for the slower growth recorded last year was the manufacturing sector.

Manufacturing, which contracted 1 percent, accounts for 18.7 percent of total output.

The slowdown follows three years of solid manufacturing growth - 5.1 percent in 2000, 3.6 percent in 2001 and 5.3 percent in 2002 - and dire warnings from industrialists and economists about the effect the strong rand and sluggish global demand, especially in Europe, were having on producers. 


The rand gained 28 percent against the dollar last year and has strengthened nearly 75 percent against the greenback since the end of 2001. This eroded export competitiveness and made imports relatively cheap, undoing much of the good that could have otherwise been expected from last year's five rate cuts.

The prime lending rate is now at 11.5 percent, its lowest level in 23 years, from 17 percent at the beginning of 2003.

The agricultural sector, which accounts for 3.9 percent of total economic output, contracted 5.9 percent in the year as farmers put smaller areas under field crops in the wake of the worst drought in more than 80 years.

Agri SA, the commercial farmers union, estimates that even though agriculture is only directly responsible for a small percentage of overall GDP, more than 1 million workers were employed on commercial farms - over 700 000 permanent workers and 300 000 casual workers.

Mining performed reasonably well, with output increasing 2.5 percent in the year. This compares with growth of 0.3 percent in 2002 and a 1.3 percent contraction in 2001.

Although they underperformed last year compared with 2001 and 2002, services companies were boosted by the cuts in interest rates, which pushed consumer confidence to four-year highs.

The personal services sector grew 4.6 percent last year, its fastest rate since 2000.


Publisher: Business Report
Source: Business Report
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