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Home News South Africa growth slumps to 0.7% in third quarter

South Africa growth slumps to 0.7% in third quarter

Published on 26/11/2013

South Africa's economic growth slowed to 0.7 percent in the third quarter, official data showed Tuesday, with labour turmoil and a weak rand weighing down Africa's biggest economy.

Gross domestic product plunged from a revised level of 3.2 percent in the second quarter to its lowest rate in four years, data from Statistics South Africa showed.

The decline was greater than market expectations.

The main negative contributor was the manufacturing industry, a result of low production caused by work stoppages in the motor vehicle sector.

“Not all industries had happy days,” said Statistics South Africa executive manager of national accounts Gerhardt Bouwer.

“Manufacturing had a negative growth, mainly due to all the strikes,” said Bouwer.

Labour unrest is ongoing in key sectors, including manufacturing and mining.

Transport workers with the South African Transport and Allied Workers’ Union are currently on strike for higher wages, as are a majority of mine workers at the Northam Platinum mine.

The figures point to more subdued growth for South Africa than expected.

The central bank, facing weak domestic demand and a large output gap, has kept its main interest rate at a historically low 5.0 percent to boost growth since July 2012.

In October, inflation slowed to 5.5 percent, but the bank cautioned that inflation is likely to remain uncomfortably close to the upper end of the target band.

The bank’s forecast for growth in 2013 was revised down to 1.9 percent. Its forecasts for 2014 and 2014 were both lowered to 3.0 percent and 3.4 percent, respectively.

Governor Gill Marcus has said the bank is in a difficult policy position with the weak rand – which has depreciated by 17 percent against the US dollar since the beginning of the year – putting pressure on inflation.

Marcus said on November 21 the Monetary Policy Committee is considering raising rates in 2014.

“Certainly raising rates was a discussion,” she said.