South Africa

Economy Slips Into Recess

outh Africa’s recent Gross Domestic Product (GDP) numbers released on Tuesday are worse than expected, FNB senior economic analyst Jason Muscat has said. This comes after Statistics South Africa (StatsSA) said on Tuesday that the South African economy had officially entered recession for the first time since 2009 with a 0.7 per cent contraction in the first quarter of the year as reported by the South Africa Broadcasting Cooperation (SABC) . This most recent decline followed the 0.3% contraction during the last quarter of 2016, meaning that South Africa has had two consecutive negative growth quarters, and pushed the country officially into a technical recession. The country went through three consecutive quarters of shrinking growth in 2008 to 2009. The weakness in GDP growth as per StatsSA figures on Tuesday was markedly broad-based, with only the primary sector (agriculture and mining) expanding at 22.2 per cent and 12.8 per cent respectively. Muscat said this was significantly worse than their already bearish expectations of 0 per cent growth. “Our concern is that the num bers are backward looking, and don’t reflect the confidence shock we expect after the cabinet reshuffle and credit downgrades,” SABC quoted Muscat as According to Bloomberg report, finance, real estate and business services industry shrank 1.2 per cent, the first decline since the first quarter of 2013. The rand lost 0.8 per cent to 12.8140 per dollar by 5:13 p.m on Tuesday. Yields on rand-denominated government bonds due December 2026 rose 4 basis points to 8.48 per cent, the first increase in five days. The six-member banks index extended declines after the release, dropping 1.7 per cent in Johannesburg. “The current growth rate, if sustained, will lead to a further decline in GDP per capita and revenue, risking the sustainability of our fiscal framework and more importantly undermining the delivery of social services,” the Treasury said.

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