Economy

South African Economy Slips into Recession

South African Economy Slips into Recession

Stats South Africa revealed on Tuesday that GDP figures for the second quarter of the year showed a contraction of 0,7%.To make matters worse, the figure for the first quarter has been revised to a contraction of 2,6%.

"The downturn in the second quarter of 2018 was a result of a fall-off in activity in the agriculture, transport, trade, government and manufacturing industries", Statistics South Africa said.

Investors have dumped South African bonds since August as an emerging markets sell-off picked up pace driven by concerns over the Turkish central bank's ability to rein in double-digit inflation, which has surged to almost 18 percent.

News that South Africa's economy has slumped into recession left the market reeling on Wednesday with the JSE All-Share index losing ground, while the rand gave up 3% to a stronger U.S. dollar.

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Statistics said the economic contraction in the first quarter was steeper than initially recorded at 2.6 per cent and that gross fixed capital formation fell by 0.5 per cent in the second quarter.

The African National Congress (ANC) says its concerned about job creation following the country's slip into a technical recession.

South Africa's rand dropped at a 2 percent rate against the U.S. dollar 0 - it's lowest level since early 2016.

Although the South African economy entered a technical recession, defined as two consecutive quarters of contraction, in the second quarter, underlying figures suggest a more upbeat reading of growth.

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The decrease of 0.7% is due to the weakening of activity in agriculture, transport, trade and production and public sectors.

According to the latest estimate from the SA Reserve Bank, the country's GDP growth will average 1.2% in 2018.

"Business confidence in South Africa is taking a knock and despite attempts by President Cyril Ramaphosa to court big foreign investment, we are failing", it said.

But mining, construction, electricity, finance and personal services experienced growth in the second quarter.

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The fact that Ramaphosa is spending most of his time going around the world begging other countries to bailout our own state-owned entities, which he plans to privatize, is a clear indication of incoherence, confusion and lack of understanding of how to manage macroeconomic policy.


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