South Africa’s economy is increasingly vulnerable to a recession in the next 12 months, with an ongoing electricity crisis further reducing activity.
The probability of a recession is 68%, up from 45% in January, according to the latest Bloomberg monthly survey of economists. The survey was conducted from February 3 to 9, and six economists responded to a question about the possibility of a recession.
The prediction comes after Eskom said the load reduction is likely to persist for at least two more years as the state power company overhauls its aging, mostly coal-fired plants. The company, which produces almost all of South Africa’s electricity, has struggled to meet demand since 2008 and has imposed cutoffs every day this year to protect the grid from collapse.
Sustained disruptions are considered the most significant risk to economic growth.
Economists surveyed by Bloomberg predict that the economy contracted in the last quarter of 2022 and that it is on track to contract in the three months to March. Statistics agency data released this week showed mining and manufacturing output, which account for about a fifth of total gross domestic product, declined in the December quarter.
The survey results are in line with the expectations of Absa economists, including Peter Worthington and Miyelani Maluleke, who this week became the first major institution to say the economy is in a technical recession. The impact of load shedding on economic growth in 2023 and beyond is uncertain because it is unclear how quickly the government and Eskom can ease outages and it is difficult to assess how different severities of power outages affect overall activity. said the Johannesburg-based lender. warned
The electricity crisis is costing the country up to R899 million a day, according to estimates by the Reserve Bank of South Africa. It cut its economic growth forecast for this year to 0.3% from 1.1%, and Governor Lesetja Kganyago said power outages will cut output growth by 2 percentage points. He predicts that electricity will be rationed for 250 days in 2023, which if it comes to fruition will be a record.
