• Gross domestic product (GDP) grew by 3.1% in the last three months of 2017, Statistics South Africa announced on Tuesday.
  • Economists had expected the number to come in at 1.8%.
  • The difference may be enough to stave off a credit downgrade.

The South African economy grew by 3.1% in the final quarter of 2017 – the highest quarterly growth rate since the second quarter of 2016. 

This is much stronger than economists expected. A Reuters poll of economists expected quarterly growth of 1.8%. The latest number brings the annual growth rate for last year to 1.3% – still pretty anaemic.

But Bloomberg reports that South Africa's outlook for 2018 is improving. "Business confidence climbed to the strongest since October 2015 in January, having fallen to a three-decade low in August."

The stronger economic momentum towards the end of 2017 means that Moody’s may be dissuaded from downgrading SA’s credit rating to junk, says Wichard Cilliers, director and head of dealing at TreasuryONE, the biggest independent treasury services provider in SA.

“This is massively positive," he says.

The ratings agency is currently reviewing its position on South Africa, after Fitch and S&P Global Ratings already downgrades South Africa to below investment grade. An announcement from Moody’s is expected before the end of the month.

Following the drought of 2016, farming output rocketed last year. The latest numbers show that the agricultural sector grew by more than 30% in the last quarter of 2017. Farms will struggle to maintain this level of growth in output which could dampen this year’s GDP growth numbers, says Cilliers.

Still, the latest positive economic surprise gives South Africa a much-needed reprieve. It also bolstered the rand. The currency started the day at R11.85 to a dollar, and was last trading almost 1% stronger at R11.75.

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