South Africa’s economy enters recession

Gladys Abbott
September 6, 2018

"Agriculture is clearly battling and was the largest detractor from growth this quarter", Hendrickse noted.

But the most shocking number in the statistics is the precipitous 29.2% decline in agricultural production over the second quarter. Household consumption expenditure slowed to 1.5% growth from a 3.2% increase in the first quarter.

According to StatsSA, the decrease was mainly due to a drop in the production of field crops and horticultural products.

"There was a decline in inventories".

"We have to pull through and make sure we don't go into an election while in recession‚" Godongwana said.

"The transport industry contracted by 4,9%, largely a result of decreased activity in both land and air transport". This was worsened by industrial action and a decline in freight transport. Analysts had predicted the economy would grow 0.6 per cent in the latest quarter.

At the beginning of the year, South Africa's economy fell at a staggering 2.6 per cent annual rate - a figure that was revised from a 2.2 percent fall.

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"He has to balance the pressure to grow the economy but at the same time he has to do things that go against the logic of growing the economy, in terms of pacifying a restless population".

"For instance: If you take the land issue, if we implemented the 1992 resolution, the ready to govern... on the land question, we would not be debating it today", he said. Weak growth makes it more hard to raise interest rates, leaving the rand even more vulnerable at a time when developing nations are tightening policy. The Budget also expected a revenue shortfall of R48.2 billion in 2017/18.

"But, that said, the tightening of global financial conditions imply countries running macroeconomic imbalances will be placed under closer scrutiny by investors, especially if imbalances reflect a weak fiscal position".

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 United States dollar. The contraction "keeps the bias firmly skewed" to rand weakness, he said.

The crises in emerging economies like Argentina are also having an effect on the Rand.

"Today's data will further dent hopes that Ramaphosa's presidency would lead to a marked turnaround in South Africa's economic fortunes", Tuvey said. "I don't think it will continue to the third quarter so I don't think South Africans should panic". "Also, the higher Value-Added Tax rate is not going to go away".

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