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.
- According to a report by McKinsey, infrastructure is the best way to grow SA's GDP.
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.