South Africa slumps into recession for first time since 2009

South Africa's slide into a technical recession in the second quarter is a timely warning and reminder for the country to get its economy in order, failing which it will lose its only investment grade rating, says Business Unity South Africa CEO Tanya Cohen.

South Africa's economy contracted for a second straight quarter during the three months to June, thus entering a recession, a first in almost a decade.

The rand stretched losses against the dollar to more than two per cent and government bonds fell after the data was released. The economy grew 0.4% from a year earlier.

"That's why we are calling for interventions that government must take‚" he said‚ adding that no party would be happy to go into elections while the economy faced recession.

GDP in the second quarter contracted by 0.7 percent compared to the first three months of the current year.

According to the report, Africa's most developed economy needs faster economic growth if it is to reduce high unemployment - now at 27 per cent - and alleviate poverty and inequality that stokes instability.

He noted that if the drag from the agricultural industry were excluded from the figures, weak contributions from other industries would still see GDP growth at a mere 0.1% in the second quarter.

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The main positive contributors were mining, up 4.9% and the finance, real estate and business services industry, which increased 1.9%.

Gross Domestic Product (GDP) data from South Africa's statistical agency published Tuesday for the second quarter of 2018 has shown that the country has entered into a technical recession.

"It probably means that President Ramaphosa's task of turning this ship around is even harder than it was in the beginning of the year", said Pienaar. Inflation stood at 5.1 percent in July.

Since his assumption into office, South Africa's President Cyril Ramaphosa has been seeking support from investors around the world to reverse the fortunes of the country.

South Africa's economy fell into its first recession for nearly a decade, exacerbating the rand's decline amid the recent emerging-market rout and heaping pressure on President Cyril Ramaphosa.

The rand, already under pressure from a broader emerging market selloff, fell sharply.

(Copyright © 2015. All Rights Reserved.)
 
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