Shock recession poses a problem for Treasury and Reserve Bank
The country’s growth story and investment prospects are evaporating, posing a problem for the Treasury and Reserve Bank
The SA economy is in far worse shape than most people realised. News that growth contracted again in the second quarter, tipping the economy into recession, has shocked the markets: most participants were expecting a mild rebound. Coming on top of the collapse in the manufacturing purchasing managers index (PMI) from 51 to 43 index points, and other poor third-quarter data, SA’s economic outlook has darkened considerably. The rand has weakened to well over R15/$ in response. This is the first time since 2009 that SA has entered a recession — something that may shred confidence in President Cyril Ramaphosa’s ability to lead an economic revival. "SA will have to try harder to achieve positive growth [now]," says Standard Chartered chief economist Razia Khan. "Positive political change on its own is not going to be sufficient." Disappointing GDP growth will have a knock-on effect on the national budget through weaker tax revenue collection. Further fiscal slippage in 2018/2019 now appe...
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