SA economy expands by 3.3%, avoids recession

Statistics South Africa (StatsSA) reported that the South African economy expanded by 3.3% quarter-on-quarter (q-o-q) and 0.6% year-on-year (y-o-y) during the second quarter of 2016, thereby avoiding a technical recession yesterday – to the joy and relief of many. During the first half of 2016, the South African economy was just 0.25% y-o-y larger. This comprised a 0.1% y-o-y contraction during the first quarter and a 0.6% y-o-y expansion during the April-June period. The positive y-o-y performance during Q2 was due to growth in manufacturing, construction, hospitality, transport, communication, finance, banking, real estate and government services, outweighing a contraction in activity associated with agriculture, forestry & fisheries, mining, and public utilities. The finance, real estate and business services sectors – collectively the largest industry, accounting for 20% of SA’s GDP – grew by 2.9% q-o-q and 2.2% y-o-y during the second quarter. During July, the South African Reserve Bank (SARB) said that it anticipated growth of 0% in the economy during 2016, while the International Monetary Fund (IMF) said it projected a mere 0.1% growth for the calendar year. According to KPMG, the outlook for the second half of this year remains less than optimistic, and the likelihood of a sovereign ratings downgrade still looms.