SA narrowly escapes recession


Although agriculture, mining and electricity are in recession, manufacturing has rebounded, helping the country to avoid – albeit just barely – a recession. Had we not averted it, that would have been the second recession in six years.

In the three months through September, GDP increased by 0.7%. This compares favourably to the quarter before, which saw a decrease of 1.3%. While this seems to offer a glimmer of hope, it is unfortunately a false hope. As reported by Bloomberg, the central bank forecast that the economy would expand 1.4% this year, although this would be the slowest rate since the 2009 recession.

Manufacturing, which accounts for 13% of SA's GDP, expanded an annualised 6.2% in the quarter. Despite this, three other sectors - agriculture, mining and electricity - are now in recession. Farming output dropped an annualised 12.6% in the third quarter, while mining plunged 9.8%. Power shortages also contributed to the economy's decline.

Making matters worse, the central bank is struggling to keep inflation inside the 3-6% target, and has little room to support growth. In addition, on 19 November, the Reserve Bank increased its benchmark repurchase rate by 25 basis points to 6.25%. This is the second increase this year.

  • Stay connected, up to date and in the loop on what is happening in the world of finance and keep track of newly published expert insights and interviews with CFOs and CEOs. Become an online member and receive our newsletter, follow us on Twitter, like us on Facebook and join us on LinkedIn.

Related articles