Following a slowdown in GDP growth from a post-COVID recovery of 4.7% in 2021 to 1.9% in 2022, there had been fears that South Africa’s economy would slump into recession in 2023.

However, several contributing factors supported the economy to eke out modestly positive growth in both Q1 and Q2, of 0.4% and 0.6%, respectively, on a q/q seasonally adjusted basis, thus avoiding recession.

Recovery in inventories has helped to push GDP growth upwards while global economic activity has caused softness in commodity prices and downward pressure on the trade balance. Experts predict that domestic economic growth is set to run at around 1% over the coming year, with the possibility of reaching 2% in the absence of load-shedding. Although mid-market businesses have shown a decline in sentiment regarding the economy, South Africa's resilience in the face of challenges is a testament to its ability to weather economic storms.

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Interest rate stress impacting consumption

Higher interest rates over the past two years have adversely impacted consumer spending. Growth in household consumption expenditure decreased by -0.7% y/y in Q2, after positive growth in 2021 and 2022.

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Resilience of SA economy underlined by lower inflation

What impact has the decline in inflation from levels above 7% to below 5% had on the current economic resilience of the economy?

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