Strong GDP growth for SA in first quarter

GDP growth in South Africa rose to an annualised quarterly 4.6% in Q1 10 from 3.2% the previous quarter. On a y/y basis, GDP grew 1.6% in Q1 10, the first positive y/y growth since Q4 08.

The impressive growth in Q1 was driven largely through the manufacturing, mining, and finance and real estate industries, which contributed more than half of the headline 4.6% q/q rise in Q1. Looking ahead, we expect quarterly economic growth to remain broadly in line with yesterday’s number, with the risk of perhaps some near-term weakness related to the strike action in the transport sector.


The Soccer World Cup (SWC) is likely to benefit the economy, but we would caution that its impact on GDP may be diluted, owing to the fact that it is spread over two quarters.

While southern Europe’s debt problems need careful monitoring, as a baseline, we believe that their impact on SA’s economy will remain manageable. From an interest rate perspective, yesterday’s GDP data do not change our view. We expect the policy rate to remain at its current level of 6.5% until at least the first half of next year, when we look for a 50bp hike.

Source: Absa Bank