Recession ‘unlikely in second quarter’

05 June 2014

The South African economy is unlikely to fall into a recession in the upcoming second quarter, the Reserve Bank said on Tuesday.

Last week, Gross Domestic Product (GDP) data showed that seasonally adjusted GDP at market prices slumped at an annualised rate of 0.6% for the first quarter of 2014.

If there is a second consecutive quarter of negative economic growth this would mean a technical recession.

“The domestic economy has also suffered a number of adverse supply shocks, particularly from strike action and electricity shortages, culminating in negative first quarter growth in 2014 – the economy’s worst performance since the 2009 recession. Although the second quarter is expected to show some improvement, the risks to the 2014 forecast are to the downside,” said the bank.

At the Monetary Policy Committee (MPC) meeting in May, the bank revised down growth from 2.6% to 2.1%.

“Inflation in South Africa is projected to be above target for an extended period of time, with risks tilted towards higher inflation. This will necessitate higher interest rates, and therefore a tightening cycle,” noted the bank in the Review.

The bank expressed “great” concern at the country’s antagonistic labour relations and persistent strikes which have deprived households of wage income and retailers of customers, damaged exports, and ultimately compromised investment and employment,” noted the Review.

By: SAnews, SA Government News Service

Read the latest issue

Latest Issue