Forecasters and analysts Oxford Economics Africa warn South Africa is likely to record the slowest growth among major African economies next year.
According to their Africa 2023 Outlook, released on Friday, South Africa’s gross domestic product (GDP) will grow by a mere 1% next year, while Senegal is anticipated to be the continent's fastest-growing economy with 7% GDP.
Senegal is expected to see a marked improvement in growth next year, with the commencement of hydrocarbon exports coinciding with a period of still-elevated international natural gas prices.
South African and Angolan economic output was projected to increase by less than 1% over the four-year period between 2019 and 2023, while growth will be more than a fifth higher in 2023 relative to 2019 levels in Rwanda, Côte d’Ivoire, Tanzania and Ethiopia.
This growth forecast is slightly lower than the downwardly revised 1.1% estimated by the SA Reserve Bank on Thursday, due to lower commodity prices, higher inflation and interest rates, and an assumption there will be increased load shedding.
Oxford Economics Africa’s head of macroeconomics, Jacques Nel, said they expected most commodity prices had peaked and would be lower in 2023 relative to 2022, putting pressure on the continent's commodity exporters.
Nel said that a less favourable external environment would curtail growth in commodity exporters and exporters of manufactured goods, including South Africa, in 2023.
“South Africa will see real exports decline next year due to weak external demand caused by recessions in the eurozone and the US,” Nel said..
“South Africa is one of the few African countries where manufactured goods make up a significant proportion of exports, and weak demand in Europe in particular will weigh on South African exports.”
Nel said that consumer spending will also be less supportive of growth than that seen in previous years, and was in fact expected to weigh on GDP in South Africa.
Consumer prices in South Africa have remained elevated this year, with headline inflation peaking to a 13-year high of 7.8% in July and leading to the loss of purchasing power as it was not accompanied by similar increases in household income.
Interest rates in the country have also been rapidly increasing since November 2021 to tame inflation, with the Reserve Bank delivering another 75 basis points hike on Thursday to take the repurchase rate back to pre-pandemic levels of 7%.
“At the other end of the spectrum, faced with a bleak growth forecast, we see South Africa, which is dealing with a number of issues including electricity constraints, transport-sector stumbling blocks and households struggling with starkly high unemployment, tighter monetary policy and uncomfortably high price inflation,” Nel said.
“South Africa is joined by Sudan and Tunisia, which are both dealing with tumultuous political environments, and Zambia, which is expected to be one of the biggest losers from adverse commodity price developments next year.”
However, there was slight hope for the country as Nel said that South Africa was one of the countries that will see the biggest stimulus from tourism next year, even though they did not expect tourism to be a significant drag on growth in any country.
Nel said some tourism-dependent economies, such as Ghana, Egypt, Tunisia, South Africa, Mauritius, and Morocco, have not yet seen tourism-driven GDP reach pre-pandemic levels.
He said the economic slowdown in Europe remained a source of downside risk given the importance of European tourists in Africa, but the continent remained a relatively cheap tourist destination.
“Countries with the most underutilised tourism capacity, such as Mauritius and Kenya, and where Asia and Africa are significant source markets, South Africa, Tanzania, Rwanda will see the biggest stimulus from tourism next year,” Nel said.