Economists expect SA to sneak out of recession in third quarter, but annual growth will be rubbish
As rating agencies cut their forecasts and the trade war sours sentiment, President Cyril Ramaphosa’s wish of 3% growth in 2018 looks increasingly unattainable
SA will probably exit its second recession in almost a decade in the third quarter, but full-year growth will still be dismal, economists said after the release of data for the first month of the quarter.
While manufacturing expanded the most in 25 months year on year in July, mining output shrank the most since October 2012 on a monthly basis, data released by Stats SA this week showed. Retail sales climbed less than estimated on an annual basis.
"The high-frequency data has been disappointing" for the third quarter so far, said Jason Muscat, an economic analyst at First National Bank (FNB). "The implications of these numbers, depending on what happens in August and September, will be for a flat contribution to GDP."
He expects GDP to expand about 1.5% in the third quarter from the previous three months and 0.7% for the year.
President Cyril Ramaphosa’s wish of 3% growth in 2018 is looking increasingly unattainable. Economists and rating companies are cutting their forecasts for GDP expansion and a global trade war has damped optimism of stronger world growth.
Subdued business confidence, weak activity in the supply side of the economy and headwinds to household spending will hinder a robust recovery, finance minister Nhlanhla Nene said on Monday.
"It could be that we see a bit of a spike in the next month or two and I’m hopeful for a positive number in quarter three," said Elize Kruger, a Johannesburg-based senior economist at NKC African Economics. "There are so many headwinds — higher fuel prices, value-added tax increases, and the possibility of an interest-rate increase towards the end of the year. For the year as a whole, it will be dismal."