Africa’s largest and yet most industrialised economy South Africa is officially in a technical recession. This is the second in the last 8 years. The Southern African nation’s gross domestic product constricted 0.72% in Q1: 2017 (from 0.3% Q4: 2016) against an expectation of 0.9% forecast by economists.
In reaction to this news the ZAR shaved off 1% falling to ZAR12.85/USD, ZAR14.45/EUR and ZAR16.6/GBP as at midday today 06 June.
Key drivers to the slump were negative growth in trade, catering and accommodation industry which plummeted by 5.9% and manufacturing which gave up 3.7% in value. Mining slowed by 10.85% in addition.
“We have officially entered a recession. The last time we entered a recession was 2008-9 when we had (3) consecutive quarters of negative growth.” Joe de Beer, Statistics SA Deputy Director General of Economic Statistics, said. There’s a clear link between the fall in household consumption expenditure and the decline in trade, he said.”
Household consumption expenditure was down 2.3% (QoQ).
Stanlib Chief Economist Kevin Lings said it was especially concerning that since the global financial market crisis in 2009, the rate of economic growth in South African had not managed to gain momentum and had not been robust enough to lead to widespread job creation in the private sector.
“This is despite government debt almost doubling since 2009. There has to now be a real risk that South African tax revenue collection under-performs even more, putting the fiscal authorities under significant pressure,” he said.
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