Economy

South Africa feels chill of recession

South Africa feels chill of recession”

"We reported a contraction in the first quarter even with revisions and now in the second quarter with a fall of 0.7%, we are in recession", Statistician-General Risenga Maluleke said in Pretoria on Tuesday.

Finance Minister Nhlanhla Nene has called on South Africans to trust government's plans and not be too concerned over the recently-declared recession.

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Manufacturing was the third industry to record a second consecutive quarter of negative growth, following in the footsteps of agriculture and trade.

At the tabling of the Budget, government expected the budget deficit to narrow to 3.5% over the next three years.

Stats SA data also showed economic output rose 0.4 percent on an unadjusted year-on-year basis in the second quarter, versus analysts' predictions for growth of 1.0 percent. Mining production expanded 4.9% from the previous quarter.

According to Stats SA, the mining sector's growth of 4.9% was led by an increase in the production of platinum group metals, copper and nickel.

"The economy is operating against a backdrop of mounting supply driven inflationary pressures and relatively subdued activity". However, that was not enough to lift overall economic growth out of negative territory, the agency said.

"South Africa's fiscal challenges will remain a constraint on the economy for some years to come".

Financial Times state that it has fallen 19% this year, with the last 19 days contributing more than half of that decline as the debate about land intensified, thanks in part to significant worldwide attention.

Reacting to the news, Maimane blamed the ANC's economic policies and its inability to create jobs for putting SA into recession.

With the dismal growth path set to trump concerns over inflation, the central bank could be forced to hold lending rates, removing another factor that made South Africa's bonds sought after among emerging markets. Since assuming office, Mr Ramaphosa has been struggling with pulling the economy from the precipice after more than a decade of decline.

"The ZAR is now under renewed pressure and may find it hard to reverse without an external backstop, i.e. improving risk sentiment".



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