South Africa is likely to emerge from its first recession in almost a decade as monthly indicators for the third quarter signal a modest rebound.
Recoveries in manufacturing and trade are expected to drive growth momentum in Africa’s most industrialised economy. Statistics South Africa will on Dec. 4 publish data that economists in a Bloomberg survey expect to show gross domestic product expanded 1.9% from the previous three months.
President Cyril Ramaphosa’s rise to power as head of the ruling party in December last year and then of the country in February initially boosted sentiment and the rand following Jacob Zuma’s tenure of almost nine years. That optimism faded as economic reforms weren’t implemented fast enough to satisfy investors and global trade wars and turmoil in other emerging markets soured sentiment. The new leader has worked to eliminate policy uncertainty that’s hobbled industries such as mining and has pledged to attract $100-billion of investment.
“Perceived domestic political and policy uncertainty have been a contributing factor to South Africa’s modest economic performance,” Investec Bank economist Kamilla Kaplan said.
A contraction in output from mining, which accounts for about 7% of GDP, is expected to weigh on quarterly growth and drag on associated manufacturing and construction activities, Jason Muscat, a senior economic analyst at FirstRand’s First National Bank unit, said by phone. South Africa is the world’s biggest platinum producer and the continent’s largest source of iron ore.
Growth is likely to be underpinned by retail sales and the finance industry, he said. Updates to GDP data published in March showed what was assumed to be the previous recession -- at the end of 2016 and start of 2017 -- didn’t happen. There is a chance the current recession may also be “revised away,” Johann Els, an economist at Old Mutual Investment Group, said last week.