Has South Africa entered secular stagnation? Evidence from structural breaks and Bayesian structural time series

This study examines South Africa’s prolonged economic growth slowdown and its implications for the secular stagnation hypothesis. Using quarterly data spanning 1960Q1–2025Q3, the analysis combines Bayesian Structural Time Series (BSTS), Bai–Perron multiple structural break analysis, regime comparisons, and Bayesian Model Averaging (BMA). The structural break analysis identifies four changes in the growth process, occurring in 1968Q2, 1982Q1, 1993Q2, and 2008Q3. BSTS estimates reveal a persistent decline in underlying trend growth, averaging 3.07% before the Global Financial Crisis, 1.53% during the post-crisis/pre-COVID period, and 0.97% after COVID-19. BMA results identify investment growth as the most consistently supported contemporaneous predictor of economic growth, while oil-price changes exhibit strong posterior support in the expanded specification. The importance of exchange-rate movements varies across model specifications and lag structures. Robustness exercises involving alternative trend extraction, growth measures, and distributed-lag investment specifications broadly support the findings. Overall, the evidence establishes persistent structural growth deceleration in South Africa, exhibiting characteristics consistent with secular stagnation. However, the analysis does not conclusively identify a demand-driven secular stagnation mechanism, highlighting the need to distinguish prolonged growth weakness from its underlying causes.