South Africa in recession for first time since 2009 as rand slumps

Andrew Cummings
September 6, 2018

According to the gross domestic product (GDP), 2nd Quarter 2018 report published by Statistics South Africa on Tuesday, the country's agriculture sector is the hardest hit, with a decline of 29 percent.

"It is spooking the market it wasn't an expected print, a lot of analysts and ourselves were expecting a very modest second quarter print, but we certainly weren't expecting a negative". "While it may not be a great print, I think we will exit the recession the third quarter", he said.

However, it is technically the first recession since the financial crisis because the figures for the fourth quarter of 2016 were revised upwards, indicating that SA was not actually in recession previous year.

"The trade, catering and accommodation industry decreased by 1.9% and contributed -0,3 of a percentage point to GDP growth".

Decreased activity in both land and air transport caused a 4.9 percent contraction in the transport industry.

However, that was not enough to lift overall economic growth out of negative territory, the agency said.

The contraction was partly driven by weak performance in the South African agricultural sector, which declined by 11% after a major drought affected parts of the Western Cape earlier this year. This latter factor is the likely result of the government trying to reign in the budget deficit.

Democratic Alliance leader Mmusi Maimane said he would write to National Assembly speaker Baleka Mbete requesting an urgent debate on how to get the country's economy "up and running again". However, Muscat says this growth is off a weak base. "It was exclusively based on expectation that the political changes would down the line result in better outcomes", said Pienaar.

It noted that optimism over president Ramaphosa's economic plan has waned, while a worsening trade war, or a slowdown in China, may push the commodity-dependent economy further downhill.

The President Cyril Ramaphosa, who headed the country in February to replace Jacob Zuma, has pledged to boost the economy, in particular by encouraging foreign investment, and also by eradicating corruption in the country.

British American Tobacco rose 2.37 percent to R732.49.

At its last meeting in July, the MPC kept the repo rate unchanged at 6.5% per annum.

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