SA Economy Shrinks by 1.3% in Largest Contraction Since 2021 July Riots, Loadshedding Played Contributing Role

• South Africa's already fragile economy shrunk by 1.3% between October and December 2022
• The contraction was caused in part by the constant loadshedding, which strained economic output
• Seven of the 10 South African industries experienced varying degrees of a contraction in economic output

JOHANNESBURG - South Africa experienced a GDP shock after the nation's economy shrunk by 1.3% in the fourth quarter of 2022.

The contraction is worse than economists anticipated and the most significant economic shrinkage South Africa has experienced since the devastating July riots in the third quarter of 2021.

Economists had initially predicted a 0.4% contraction between October and December.

Loadshedding placed heavy toll on output, contributing to economic contraction

Increased loadshedding during the last three months of 2022 considerably strained SA's economy. The country experienced varying stages of rolling blackouts daily, except for two days that were loadshedding-free, News24 reported.

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The Nedbank Group Economic Unit said the lack of consistent electricity supply hurt the output and sales in all industries while simultaneously increasing the cost of production.

According to Reuters, the economic contraction indicates that the nation is heading for a recession if the economy shrinks again in the current quarter.

7 out of 10 industries shrank: Agriculture led the pack with 3.3%, followed by mining with 3.2%

According to Statistics SA, seven of the country's 10 industries contracted in the last quarter of 2022.

Agriculture, forestry and fishing output fell 3.3%, while mining and quarrying shrank by 3.2%. These are the other industries that contracted between October and December of 2022:

• Finance, real estate and business services: 2.3%
• Trade, catering and accommodation: 2.1%
• Electricity, gas and water: 1.9%
• Manufacturing: 0.9%

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South African worried about the country's economic future

Here's how South Africans reacted to SA's shrinking economy:

@J450NCH4PM4N predicted:

"This first quarter is going to be a bloodbath."

@patelroxie complained:

"What is worrying is that our government is not equipped to lead us out of any crises."

@garthserg jabbed:

"Prime opportunity for ANC and Cyril to appoint a minister of GDP. Loadshedding, lack of railways and crime definitely not taking the country forward."

@Stash629 quipped:

"Thank you, @Eskom_SA."

@Weri_VonDee asked:

"With loadshedding being the main cause, what did they then expect?"

@Questerr_ commented:

"GDP shrinking, not greylisting, should worry you."

IMF’s latest global economic outlook report predicts South Africa’s economy will grow in the next 2 years

In another story, Briefly News reported that South Africa’s economy is expected to improve in the next two years despite the country’s challenges.

The International Monetary Fund’s latest global economic outlook report suggests that Mzansi will retain its position as the second-largest economy in sub-Saharan Africa. The economy is expected to increase by 1.3% in 2023 and 1.4% in 2024.

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According to Business Insider SA, South Africa is on its top five economies to watch list. The country is expected to have a Gross Domestic Product (GDP) of about R7.3 trillion, which is likely to continue growing in the coming years.

Source: Briefly News