S. Africa’s GDP growth contracts 1.3% in Q2
JOHANNESBURG: South Africa’s economy contracted in the second quarter, worsening the outlook for a nation grappling with a plunging currency, power shortages and a slump in commodity prices.
Gross domestic product fell an annualised 1.3% from the previous quarter, when it expanded 1.3%, the statistics office said in a report released in the capital, Pretoria, yesterday. The median estimate of 16 economists surveyed by Bloomberg was 0.6%.
Power constraints and a slump in prices of platinum, copper and other commodities are stifling output and limiting the economy’s recovery from the slowest expansion last year since a 2009 recession.
That’s canceling out any benefit to exports coming from the rand’s slump to a record low of 14.0682 against the dollar on Monday.
“There is a very good chance that the economy will not do any better than last year, when it expanded 1.5%,’’ Hugo Pienaar, an economist at the Bureau for Economic Research, said by phone from Stellenbosch, outside Cape Town, before the data was released.
South Africa faces more than 60,000 job losses this year, mainly in mining as companies from Anglo American Plc to Lonmin Plc plan job cuts, according to labour union, Solidarity.
A collapse in wage talks between gold producers and the two biggest labor unions in the industry adds to more volatility.
The central bank has little room to support the economy as a weaker rand fuels inflation.
The Reserve Bank increased its benchmark repurchase rate by 25 basis points to 6% last month, the first policy move in a year, forecasting that inflation will exceed the 3% to 6% target band for the first half of next year.
“The bank will conduct policy in a manner that is sensitive to the fragile state of the economy,” governor Lesetja Kganyago said on July 31. He estimates expansion of 2% this year. Gross domestic product fell an annualised 1.3% from the previous quarter, when it expanded 1.3%, the statistics office said in a report released in the capital, Pretoria, yesterday. The median estimate of 16 economists surveyed by Bloomberg was 0.6%.
Power constraints and a slump in prices of platinum, copper and other commodities are stifling output and limiting the economy’s recovery from the slowest expansion last year since a 2009 recession.
That’s canceling out any benefit to exports coming from the rand’s slump to a record low of 14.0682 against the dollar on Monday.
“There is a very good chance that the economy will not do any better than last year, when it expanded 1.5%,’’ Hugo Pienaar, an economist at the Bureau for Economic Research, said by phone from Stellenbosch, outside Cape Town, before the data was released.
South Africa faces more than 60,000 job losses this year, mainly in mining as companies from Anglo American Plc to Lonmin Plc plan job cuts, according to labour union, Solidarity.