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Economists predict South African recession this year
The last two quarters of 2018 have been one of the toughest the country’s economy has had to endure.
Image from Pixabay
On Thursday, a Reuters poll of economists predicted that there is a one-in-three chance that South Africa will go into a recession this year.
The last two quarters of 2018 have been one of the toughest the country’s economy has had to endure. Around 30 economists polled predicted a 1.4% in growth for South Africa’s economy in 2018, following up with 1.9% in 2019.
Although sluggish, it was still a more positive outlook than the South African Reserve Bank’s (SARB) expectation of a growth of 1.2%.
In a monetary policy meeting held in July, SARB reduced its expectation by 0.5 percentage points from what it had put forward in May, a predicted growth of 1.7%.
This is how we may still experience a recession in Q4
For the period between April and June, the consensus view perceives 0.6% in growth on a quarterly basis., a weak recovery from the 2.2% contraction that was witnessed in the first quarter.
Jeffrey Schultz, an economist at BNP Paribas, stated that
“the risk is that the services-driven sector, particularly financial services, fared poorly again in the second quarter, which could be the difference between whether South Africa avoids slipping into a recession or not.”
Frank Blackmore from EFConsult added that
“a year-on-year growth rate for the second quarter of around or below 0.8% would result in a negative seasonally-adjusted and annualised growth value. That would be the second quarter in a row of negative growth, and technically a recession.”
Furthermore, Reuters released a separate poll which showed that the rand’s performance against foreign currencies would not recover from this year’s slump, at least not until 2019.
The impending rise of interest rates in major economies, as well as trade tensions, have impacted our currency in a negative way.
As predicted by the SARB, inflation in South Africa should remain within the 3 – 6% target band.
This is how the rand performed against major currencies as of 10:00 on Thursday:
- Dollar / Rand – R14.39 (-1.5%)
- Pound / Rand – R18.55 (-1.3%)
- Euro / Rand – R16.60 (-1.3%)
