Economic growth is expected to decline in the coming months as the effects of the conflict in the Middle East has had on oil prices and its impact on inflation becomes more pronounced.

This after the latest GDP data released by Statistics South Africa showed that the economy grew by 0.5 percent in the first quarter of this year compared to 0.4 percent in the previous quarter.

The data indicates that nine out of 10 sectors tracked by Stats SA recorded positive growth in the first quarter except for the manufacturing sector which declined in the period.

Standard Bank Economist Shireen Darmalingam elaborates, “We anticipate a slowdown in GDP growth in the coming quarters driven by the protracted Middle East conflict and the resulting increase in fuel costs. Business confidence has already deteriorated in the second quarter and we expect mounting pressures on consumers who are already under strain prior to the fuel price shock. Conditions are likely to worsen further from the second quarter as fuel prices surge and interest rates increased, the impact of the Iran conflict on SA economic growth however is being counteracted by SA’s elevated terms of trade and support from ongoing policy reforms. We continue to expect a moderate improvement in growth to around 2% over the medium term.”

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