Economists believe a recession in South Africa is very likely this year

Economists believe a recession in South Africa is very likely this year

- A recent poll of 30 economists has revealed that they believe South Africa could enter a recession during 2018

- The economy suffered its worst contraction period in nine years during the first quarter

- This means if the economy grows by less than 0.8% in the second quarter the country would enter a technical recession.

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South African consumers could face more pain in the short and medium term. A recent poll has found that economists believe there is a one in three chance of the country entering a recession at some point in 2018.

The already struggling economy suffered its worst first quarter performance for nine years and means that anything less than 0.8% growth during the second quarter will mean the economy has shrunk in real terms for a second straight quarter and the country would be in a technical recession.

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Economists have predicted that the economy would grow by around 1.4% in 2018 and just 1.9% in 2019. These figures low as they might be are still more optimistic than that aired by the South African Reserve Bank.

Briefly.co.za gathered that the Reserve Bank adjusted its growth forecast when it met in July with a new lower figure of just 1.2% for 2018, down from its previous estimate of 1.7%.

Worryingly for consumers, businesses and the markets the consensus from both the Reserve Bank and economists is for second-quarter growth of just 0.6%.

Thesouthafrican.com reported that economists have expressed their concern that service driven sectors such as financial services will perform below expectation during the second quarter and this could become the crucial factor around whether the economy enters a recession or not.

EWN.co.za reported that the shockingly bad performance of the economy in the first quarter stood as a stark reminder of the huge mountain which President Cyril Ramaphosa’s administration was forced to climb.

The damage to the economy had been caused in large part by the administration of former president Jacob Zuma. The new administration will need to focus on long-term growth and providing investor confidence.

Economists said it was likely that interest rates would remain at their current levels for 2019 and would not be adjusted much in 2020.

The rand’s recent slip against major international currencies is also expected to continue with no significant strengthening of the local currency until at least 2019.

Inflation is expected to remain within the targeted range in the short to medium term.

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Source: Briefly.co.za

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