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South Africa’s economy grows 4.1% in 2021

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JOHANNESBURG (AP) – South Africa’s economy is on track to grow 4.1% in 2021, above recent average forecasts for sub-Saharan Africa as a whole, but not enough to offset the huge coronavirus-related contraction. last year, according to a Reuters poll on Friday.

The rebound comes after a 7.0% contraction last year and the most recent median forecast from economists surveyed last week was 0.2 percentage point better than in last month’s survey. Next year’s growth was expected to slow to 2.4%.

Eskom, which supplies most of the electricity to Africa’s most industrialized nation, has been implementing regular power outages, or load cuts, due to aging coal-fired power plants. The slow pace of COVID-19 vaccines is another drag on growth.

“So far, concerns about loss of cargo, a third wave of COVID-19 infections, and local pedestrian vaccine launches have been the crucial factors explaining the hesitancy to notably boost the real GDP growth forecast for 2021. “Hugo Pienaar said in the Office of Economic Research.

The country’s gross domestic product expanded 1.1% quarter-on-quarter in the first three months of 2021 on a seasonally adjusted basis, after a 1.5% expansion in the fourth quarter of 2020.

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Pienaar’s aggregate risks were now materializing, but better-than-expected first-quarter GDP data, as well as indications that at least some of the momentum was sustained this quarter, imply that GDP growth potentially well above average. 4% in 2021 was becoming a reality.

On an annualized and seasonally adjusted basis, the economy grew 4.6% quarter-on-quarter, following a 5.8% growth in the previous quarter.

“Importantly, like the second wave, this represents a continued (lighter) touch by the government on closure restrictions through the third wave,” Pienaar said.

South Africa has entered a third wave of infections, prompting authorities to impose a stricter level 3 lockdown amid a surge in daily cases. The level includes restrictions on the sale of alcohol and stricter rules on public gatherings.

Medians in a Reuters poll conducted in April showed that sub-Saharan Africa was expected to grow 3.3% in 2021 after contracting almost 2% last year.

Statistics South Africa said in its latest GDP report that during periods of economic instability annualized readings can be misleading because they exaggerate growth rates that are unlikely to repeat themselves.

Stats SA said that largely as a result of the COVID-19 pandemic and lockdown regulations, real GDP contracted sharply in the second quarter of 2020 and rebounded strongly in the third quarter, making annualized rates already they would not be your main figures.

South Africa announced new measures to address its electricity supply problem, which has long weighed on the economy, but Capital Economics said the measures will likely take time to bear fruit.

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Interest rates were expected to remain unchanged at 3.50% this year, but would rise to 3.75% in January or March next year and 4.00% in July or September.

Quarterly inflation figures show that South Africa is already experiencing negative real rates, although the rand has been very supportive in containing imported inflation.

Inflation, which South Africa tries to keep between 3% and 6%, was expected to average 4.2% this year and 4.4% next.

(For other stories from Reuters’ long-term global economic outlook survey package 🙂

(Reporting by Vuyani Ndaba; additional survey by Manjul Paul; edited by Philippa Fletcher)

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In-depth reports on the economics of innovation from The Logic, presented in association with the Financial Post.

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