JOHANNESBURG – South Africa is determined to prevent slipping into a technical recession this current year following surprise improvements in mining and manufacturing output, however the economy remains under time limits as a consequence of recent credit downgrades to junk.
The economy contracted 0.3% from the final quarter of 2016 and a second consecutive contraction would’ve pushed the economy into recession initially since global finiancial crisis of 2009.
Mining output beat expectations of an 4.3% increase, with demand from China and better commodity prices globally propelling the sector’s output into a two-year high.
While increase manufacturing was modest, at 0.3% year-on-year in March, after shrinking by 3.7% in February, it had become comfortably wide of market expectations of any 2% contraction.
“The improved mining, development in agriculture and the improved vehicle sales must keep first quarter GDP increase positive territory,” senior economist at Nedbank Nicky Weimar said.
Treasury has said it expects the economy to be expanded by 1.3% this coming year. On Tuesday the International Monetary Fund stated it saw South Africa’s growth at 0.8% in 2017.
The decision in April by S&P Global Ratings and Fitch to downgrade Africa to subinvestment after President Jacob Zuma removed Pravin Gordhan as finance minister had increased the chance of recession.
The rand plunged about 12% while in the wake on the cabinet changes, prompting the central bank to postpone possible apr cuts a result of a weaker currency stoking inflation. The downgrade additionally limited already dire variety of investment.
But the steep jump in mining output in March, by 15.5% mathematically Africa data on Thursday, joined with unexpected rebound in manufacturing may even see growth live in the black, economists said.
“That’ll be a sizeable contribution to quarter one growth in particular when we expect the agricultural sector to start to contribute positively,” said Elize Kruger of NKC African Economics, who forecasts first quarter growth at 1%.
Nedbank’s Weimar said the the downgrades to junk were the large negative.
