Economy loses steam in the second quarter

Growth slows from Q1’s nine-year high: The economy lost momentum in the second quarter, growing 4.1% year on year but falling short of the first quarter’s nine-year high of 4.6%. On a seasonally adjusted quarter-on-quarter basis, economic activity was flat in Q2, deteriorating from the previous period's 2.1% expansion and marking the worst reading since Q1 2023.

Hydrocarbons sector runs out of gas in Q2: Oil sector growth more than halved to 2.6% year on year in the second quarter from 6.9% in Q1, driving the overall slowdown. In particular, oil production growth slowed to a crawl, increasing 1.1% in the quarter (Q1: +13.4% yoy). More positively, non-oil output rose at a near three-year high pace of 4.7% year on year (Q1: +3.9% yoy). An over 60% surge in mining output and faster growth in manufacturing activity spearheaded the upturn. A faster increase in agricultural sector output added momentum. That said, the services sector dragged on growth, as contracting transport sector activity plus a softer rise in wholesale and retail trade outweighed improvements in the real estate and public administration sectors.

Economy to head into a rougher patch in H2: The economy is forecast to run out of fuel in H2, as a tighter monetary backdrop, elevated inflation and a weaker kwanza in annual terms strangle domestic demand. Moreover, a higher base of comparison will dent oil production. That said, our panelists expect GDP growth to more than double in 2024 from 2023 due to a strong performance in H1 and to remain largely steady in 2025. Higher-for-longer interest rates are a key downside risk.

Panelist insight: Oxford Economics’ Gerrit van Rooyen commented: “Our growth projection for 2024 partly reflects a bounce-back in oil production following the completion of extensive maintenance in Q1 2023. Non-oil GDP will still be supported by investment in oil refining, mining exploration, transport infrastructure, renewable energy, and the extension of the privatisation programme to a second round (2023-2026).”

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