South Africa hit by second recession in 8 years

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South Africa hit by second recession in 8 years

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South Africa is currently in recession since 2009, when its economy slumped repeatedly in the year’s first quarter.Statistics South Africa in Pretoria reported that the country’s Gross domestic product (GDP) went down by 0.7 percent in the first three months from an earlier 0.3 percent.It was observed that the current rainy season is responsible for the recovery in Africa’s most-industrialized nation from the effect of scarcity of water in 2015. The drought was regarded the harshest experience for over a century ago and recent political woes is making it difficult to increase growth.President Jacob Zuma’s decision of laying off finance minister, Pravin Gordhan in March brought more tension resulting in the forfeiture of South Africa’s investment-grade status since 17 years ago.The effect of this was the tightening of growth in nearly all industries outside agriculture and mining in the quarter, according to the statistics office. It was also noticed that services industry such as finance, real estate and other businesses reduced by 1.2 percent. This was the first reduction experienced since first quarter of 2013.South Africa’s rand exchanges for a dollar at 12.8920. Profits on government bonds with maturity date by December 2026 increased 6 basis points to 8.49 percent, one which is the first in five days. Also six-member banks index extended reduces following the report, losing 1.7 percent in Johannesburg.South Africa’s debt at the highest non-investment grade the previous week has necessitated S&P Global Ratings and Fitch Ratings Ltd considering the danger policy uncertainty and slow economic growth will pose to fiscal consolidation. Same is with Moody’s Investors Service, which is also looking the possibility of a downgrade.An economist with Citigroup Inc. in Johannesburg said: “The rating agencies, even if they have already done their assessments, will no doubt be downgrading their GDP outlook off the basis of these numbers”.Another economist with KPMG LLP in Cape Town, Christie Viljoen, said: “The first quarter ended with the cabinet reshuffle and the second quarter started with the credit-rating downgrades, so in terms of consumer and business sentiment I can’t see an improvement. I’m not excited about a big turnaround in the GDP numbers for the second quarter, there’s just no reason to believe that at this stage.”With the considerations for possible downgrades, the central bank thinned its growth forecast in 2017 to 1 percent from 1.2 percent on May 25 as well as reduced the hope for 2018 to 1.5 percent from 1.7 percent.

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