Ramaphosa starts with a recession, just like Zuma nine years ago
- by Shawn Tate
- in Economy
- — Sep 6, 2018
South Africa's economic growth slowed unexpectedly in the second quarter, pushing the country into a recession for the first time since 2009.
The rand stretched losses against the dollar to more than 2% and government bonds fell after the data was released.
"That's why we are calling for interventions that government must take‚" he said‚ adding that no party would be happy to go into elections while the economy faced recession.
Considering average growth of just 0,6% during the first half of this year, the SARB is likely to revise lower its projection for 2018 and 2019 when its Monetary Policy Committee (MPC) meets again in September.
Tuesday's GDP figures led many economists to cut their full-year growth forecasts for South Africa.
The main reason for negative growth in Q2 was a "fall-off in activity in the agriculture, transport, trade, government and manufacturing industries", say Stats SA. Mining output grew by 4.9 percent and finance by 1.9 percent.
The buoyant market mood that took hold after he was elected leader of the ruling ANC in December and then president of South Africa in February appear to have dissipated.
It is a huge blow to President Ramaphosa's controversial reforms.
The president is now in China, attending a summit.
Investors have dumped South African bonds since August as an emerging markets sell-off picked up pace driven by concerns over the Turkish central bank's ability to rein in double-digit inflation, which has surged to almost 18 percent.
The South African Reserve Bank (SARB) said in May that it expects economic growth to rise from an average of 1,3% past year to 1,7% in 2018.
South Africa has lost its investment grade credit rating with Fitch and S&P Global, and Moody's could well follow suit. This is the lowest level in just over a year.
UK Prime Minister Theresa May, the International Monetary Fund and Chinese President Xi Jinping have all said they recognise the need for land reform in South Africa and urged the country to exercise due care when implementing the policy.
Citadel's Ackerman however, said it would be wrong to lay the blame for poor economic performance on Ramaphosa "as it remains a legacy of ten years of economic mismanagement".
