South Africa Enters Technical Recession


Widespread droughts throughout the country have hit the agricultural sector, resulting in a mammoth 29.2% decline in the second quarter.

A draft proposal to confiscate white-owned farms and redistribute land to address racial inequalities was withdrawn for further study.

At the time of this article's update the Pound-Rand exchange is up 2.26% at 19.54 and the prospects of an extension of the rally towards the R20.00 barrier have increased substantially.

It is a huge blow to President Ramaphosa's controversial reforms.

He said the economic transformation committee had recently established an accountability framework in a bid to make sure those deployed to government account to the party.

The buoyant market mood that took hold after he was elected leader of the ruling ANC in December and then President of South Africa in February appeared to have dissipated, it added. "We'll get stuck in our low-growth term if we can't get out of this". "The optics of South Africa are poor".

The weakness was driven by a fall in activity across a wide range of sectors.

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The country's Gross Domestic Product was reported at a decline of 2.6 per cent in the first quarter and is the first recession since 2009. However, that was not enough to lift overall economic growth out of negative territory, the agency said. After all, momentum in the South African Reserve Bank's leading indicator continues to point to a better second half of the year.

"Clearly this is not what Ramaphosa would like running into the elections next year", he said.

"There's demonstrable evidence across the world‚ that says there is a correlation between economic growth and electoral support‚" he said.

"On balance, the growth outlook into next year is modest at best".

South Africa has entered a technical recession, with Statistics South Africa reporting that the economy contracted by 0,7% quarter-on-quarter (q-o-q) on a seasonally adjusted and annualised basis during the second quarter of 2018.

For the local market, "there seems to be no sign of halting the downtrend" for emerging-market assets, said Koji Fukaya, chief executive officer at FPG Securities Co in Tokyo.

A recession is widely defined as two or more consecutive quarters of contraction.