The worst may be over for Africa’s two largest economies as they likely emerged from a slump in the second quarter.
Official data on Tuesday will probably show South Africa’s economy expanded in the three months to June, ending its second recession in less than a decade. Nigeria’s GDP probably grew from a year earlier, and came out of its worst slump in a quarter of a century.
South Africa and Nigeria together account almost half of sub-Saharan Africa’s GDP and their recoveries may boost trade and production across the region. The reasons differ: while Nigeria, the continent’s biggest oil producer, is benefiting from a rebound in crude output, stronger retail sales may help drive growth in South Africa.
“In both cases, a lot of the ‘recovery’ is due to things bouncing back from very poor performances in the reference quarter,” John Ashbourne, an economist at at London-based Capital Economics, said in an e-mailed response to questions. “But that’s not all. In both cases, there is some real growth.”
South Africa’s economy probably expanded 2.3% in the three months to June from the previous quarter, according to the median estimate of 18 economists in the survey. Nigerian GDP likely grew 1.6% from a year earlier after contracting for five straight quarters, a separate survey shows.
A drop in the output and price of oil, Nigeria’s largest export, and a lack of foreign currency weighed on West Africa’s largest economy last year. The naira weakened after new rules allowing foreign-exchange dealers to quote naira levels used in actual trades came into place, and increased inflows alleviated some of the dollar shortages.
Economic growth in Nigeria will “return to positive territory in the second quarter, on the back of a recovery in oil production, solid agriculture growth and an improvement in foreign-currency liquidity”, Yvonne Mhango, an economist at Renaissance Capital, said in an e-mailed response to questions. “We expect the recovery and growth to be fragile.”
The Zuma factor
South Africa’s economic woes were exacerbated by President Jacob Zuma’s dismissal of Pravin Gordhan as finance minister, which led to Fitch Ratings and S&P Global Ratings cutting the nation’s foreign-currency debt to junk in April. The central bank halved its GDP growth forecast for the year to 0.5% in July.
Agriculture and mining were the only two industries that expanded in the first quarter and both continued to perform well in the three months through June. Farming output was boosted by the end of the worst drought in more than a century and mining benefited from rising commodity prices.
“I don’t think its the start of a renewed growth cycle, but I think that the fear that we are heading for a deep recession has been abated,” Kevin Lings, an economist at Stanlib Asset Management in Johannesburg, said by phone. — Reported by David Malingha Doya, with assistance from Simbarashe Gumbo and Arabile Gumede, (c) 2017 Bloomberg LP
