South Africa’s economy exited its second recession in almost a decade in the three months ended 30 June after agricultural output surged.
GDP increased at an annualised 2.5% in the second quarter compared to a revised decline of 0.6% in the previous three months, the statistics office said in a report released on Tuesday in Pretoria. The median of 21 estimates compiled by Bloomberg was for growth of 2.3%. The economy expanded 1.1% from a year earlier.
Low demand for the country’s exports and political turmoil that’s caused instability have weighed on output by Africa’s most industrialised economy. S&P Global Ratings and Fitch Ratings cut the nation’s international debt to junk in April after President Jacob Zuma fired Pravin Gordhan as finance minister, with the changes roiling markets and battering business and consumer confidence. The central bank cut its benchmark rate for the first time in five years in July, citing concern about the growth outlook.
“Higher commodity prices likely continued to catalyse growth in the mining sector,” Mamello Matikinca, an economist at First National Bank, said in an e-mailed note from Johannesburg before the release of the data. “While a shallow rate-cutting cycle may provide some relief to the consumer going forward, we nonetheless expect the recovery to be short-lived given just how weak consumer confidence and real wage growth is.”
Agricultural output surged 34%, the agency said.
The central bank halved its economic growth forecast for this year to 0.5% and trimmed the outlook for 2018 to 1.2% from 1.5%. GDP expanded at the lowest annual rate since a 2009 recession last year.
The inflation rate dropped to an almost two-year low in July, reaching 4.6%.
The rand was trading largely unchanged at R12.95/US$ by 11.31am. Yields on rand-denominated government bonds due in December 2026 were little changed at 8.52%.
The government will probably cut its output forecast in October, when finance minister Malusi Gigaba delivers his first medium-term budget policy statement.
In the February budget review, national treasury left its growth estimates unchanged from the mid-term budget in October, with the economy forecast to expand 1.3% this year, 2% next year and 2.2% in 2019. Annual growth has slumped since 2011, which has hampered the government’s ability to reduce the 27.7% jobless rate. — Reported by Arabile Gumede and Thembisile Dzonzi, with assistance from Simbarashe Gumbo, (c) 2017 Bloomberg LP