Stagnant GDP growth ‘a red flag’

North-West University economist Waldo Krugel said it is disappointing that economists are forced to welcome a mere 0.1% growth.

Stats SA confirmed that South Africa avoided contraction between January and March, with growth mainly driven by agriculture.

The agriculture, forestry, and fishing sector grew by 15.8%, contributing 0.4 percentage points to GDP.

”It’s a pity that economists have to be optimistic about just 0.1% economic growth. We expected this slowdown, as high-frequency indicators like purchasing managers’ indices and monthly manufacturing and mining stats pointed to weaker activity,” said Krugel.

" The fact that agriculture, which is a small part of GDP,  is once again the main positive driver shows how little growth is happening elsewhere.

“On the spending side, households are the key contributors, with increased spending on transport, reflected in the first quarter’s new vehicle sales, as well as on food and beverages, restaurants and hotels, and health.

“This may be supported by last week’s repo rate cut. But what’s truly worrying is the contraction in investment spending.”

FNB Senior Economist Thanda Sithole added: “Growth was narrowly concentrated, with agriculture once again delivering a strong performance, while transport, finance, and trade made modest positive contributions.

“However, key sectors such as mining, manufacturing, electricity, construction, and government services contracted, underscoring ongoing structural challenges.

“On the demand side, household consumption showed some resilience, increasing by 0.4% quarter-on-quarter, but fixed investment remains weak, with gross fixed capital formation falling by 1.7%, largely due to a sharp 4.5% decline in private sector fixed investment.”

Despite the modest gain, Standard Bank economist Elna Moolman said the outcome was better than expected.

“The economy marginally outperformed our expectations in the first quarter, growing by 0.1% instead of stagnating as we had anticipated.

"However, this growth was largely driven by a very strong performance in the agricultural sector. Outside of agriculture, the economy remained generally weak, with more than half of the sectors contracting compared to the previous quarter.”

Professor Raymond Parsons, economist at NWU Business School, said the disappointing GDP growth figure of 0.1% is no surprise.

He said that several months of muted high-frequency economic data confirmed this likely outcome.

“Although adverse global developments earlier this year also played a role, the weaker economic data was already apparent before then. This reality was recently presaged by several reduced growth forecasts for 2025, including by the National Treasury (1.9% to 1.4%) and the SARB (1.7% to 1.2%).

“If present trends persist, the growth outlook for this year now seems likely to be only about 1%, possibly rising to about 1.5% in 2026. It is clear that the incipient economic recovery in South Africa is presently struggling to gain momentum and needs maximum support to strengthen the business cycle upturn.”

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