Picture: ISTOCK
Picture: ISTOCK

SA has a one-in-three chance of falling into recession, according to about 30 economists in a Reuters poll

The economy shrank 2.2% in the first quarter. Statistics SA will release second-quarter gross domestic product (GDP) data on September 4. Another drop would mean SA is in recession.

Nonetheless, the economists in the Reuters poll expect SA’s economy to grow by 1.4% this year and by 1.9% next. And the consensus is for growth of 0.6% in the second quarter.

BNP Paribas economist Jeffrey Schultz said the poorly-performing services sector could be the key determinant of whether SA falls into recession.

The poll showed the Reserve Bank holding interest rates at 6.5% until at least end-2019 and then increasing them by only 25 basis points in 2020.

But that would leave the rand vulnerable, as emerging markets are battered. The increases prospect of further US interest rate hikes is also negative for the rand — and therefore for inflation and interest rates.

Inflation in SA, according to the Reuters poll, is expected to remain within the Bank’s 3%-6% target band, averaging 4.7% in 2018, and 5.2% in both 2019 and 2020.

With Reuters