South Africa will avoid an economic depression in the second quarter even though the economy shrank during the January-March period, for a recovery in mining and manufacturing is probably going to lift growth in the April-June period, the central bank said on Wednesday.
The continent’s most industrialised economy contracted 1.2% while in the first quarter when the mining, manufacturing and agricultural sectors retreated sharply.
But chances are it will narrowly avoid a technical recession – two straight quarters of growth – inspite of the central bank a couple weeks ago cutting its 2016 growth forecast to zero, Deputy Governor Daniel Mminele said from a speech posted for the bank’s website.
“The SARB (South African Reserve Bank) isn’t going to believe that a contraction in the second quarter is liable – an outcome that might tip the economy towards a technical recession,” Mminele said.
“The reasons due to this are reasonably positive economic data up to now for any second quarter, specifically, the mining and manufacturing sectors are required so as to add positively to growth.”
The SARB last week kept its benchmark rate on hold saying a weak economy had persuaded it to pause a hiking cycle.
Mminele said the positive economic data to your second quarter, as well as a fall in inflation and reduce global oil prices should vindicate the SARB’s decision.
The Treasury in February set a 2016 growth target of 0.9%.
Finance Minister Pravin Gordhan said on Wednesday that forecast was unlikely to become revised to above 1%, but he also eliminated a contraction for your year in its entirety.
“It’s not necessarily will be below zero however it certainly is not going to be above 1% either. There’s a lot of diligence to complete,” Gordhan said, addressing students at the University of Cape Town.
The International Monetary Fund has also slashed a unique growth forecast for Africa to 0.1%.
South Africa’s GDP growth averaged about 5% during the a few years before recession hit in 2008. Government entities has previously suggested continuing development of 7% is necessary to significantly slash unemployment.
Manufacturing output rose in excess of expected in May, while mining contracted in a slower rate inside the same month.
On the consequences with the UK’s decision a few weeks ago to stop the european countries, Mminele said Nigeria would be among the many hardest hit economies in Africa.
“South Africa’s trade links are relatively small, but may suffer one of the most, given its strong investment and financial links with the UK,” said Mminele, adding that foreign direct investment was apt to be hit.
FDI inflows to Nigeria have already been declining rapidly, falling to 9.9 billion rand ($690 million) in the first quarter from 22.6 billion while in the final quarter of 2015.
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