South Africa facing another recession: analyst

After its second-quarter rebound, the South African economy ground to a halt in the third quarter. Data released by Statistics South Africa on Tuesday (3 December) shows that the economy contracted 0.6% quarter-on-quarter having roughly stood still in real terms over the past year.

The news isn’t a complete surprise with related data having already provided early indications of a slump in second-half activity, said Reza Hendrickse, portfolio manager at PPS Investments.

“Although technically not in recession at the moment, conditions on the ground in South Africa are undoubtedly recessionary. Growth is absent, confidence is lacking, unemployment is rising and the prevailing trend is not in our favour.

“Optimists might point to the current low base, which should lend itself to a rebound of some sort, but it is becoming increasingly difficult to see how any mild cyclical recovery could to be the start of a more enduring structural uplift. ”

While a pickup in global growth next year might provide the proverbial rising tide which lifts all ships, South Africa remains in need of a credible growth plan, which perhaps Treasury has provided the starting point for in Tito Mboweni’s recent growth strategy document, said Hendrickse.

“For now, we expect no material uplift in the fourth quarter, and for current conditions to continue for the remainder of the year.

“One is always hopeful however, and the recent tick up in business confidence could be something to keep an eye on.

“Unfortunately, today’s print sets the tone for the February Budget, against which Moody’s will decide on the fate of our Investment Grade rating. ”

Read: South Africa’s GDP contracts in the third quarter

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South Africa facing another recession: analyst