Home News S.Africa avoids recession as economy expands 0.7%

S.Africa avoids recession as economy expands 0.7%

Published on 24/11/2015

South Africa's economy grew by 0.7 percent in the third quarter, avoiding a recession after shrinking the previous quarter, data showed Tuesday, as the country struggles with multiple financial woes.

Power shortages have affected industry, unemployment is over 25 percent, and the global fall in commodity prices has badly hit South Africa’s key mining sector.

Statistics South Africa said that manufacturing and financial services helped lift GDP, while poor mining figures had been a drag on growth.

“Real gross domestic product (GDP) at market prices increased by 0.7 percent during the third quarter of 2015,” it said.

The economy had shrunk by a shock 1.3 percent in the second quarter.

Growth across the sub-Saharan region has been scaled back following the crash in commodity prices.

Severe water shortages have also affected agriculture in South Africa, as the country endures its worst drought for decades.

“The economic outlook remains relatively weak,” Nedbank said in a statement after the GDP figures were released.

“Further restructuring is likely in mining and manufacturing given high costs structures, slowing demand from China and the ongoing slump in global commodity prices.

“Further pain in also expected from the drought in key farming areas.”

Last week South Africa’s central bank raised its benchmark interest rate to counter inflationary pressure, in a move seen as likely to dampen future growth.

Higher US interest rates, possibly from next month, could pull the rand down even further after it plunged to a record low against the dollar.

The central bank also lowered its 2015 growth forecast to 1.4 percent.

Inflation currently stands at 4.7 percent, within the bank’s target range of between 3.0 and 6.0 percent.