South Africa slips into recession

South Africa slips into recession

South Africa slid into an official recession Tuesday, as second-quarter growth domestic product (GDP) figures showed a contraction of 0.7% - the second straight quarter of decline. This was the first decrease since the first quarter of 2016.

But because of the sophistication of the South African economy, the country is a direct beneficiary and suffers the implication of any effect or setback in emerging market economy.

The president told parliament last month that his cabinet was working on a stimulus package for the economy; and South Africa is seeking $100bn (£78bn) investments from global investors.

In the second quarter, the contraction was driven primarily by the primary sector, with agriculture weighing down the positive growth in the mining sector. "Given the outright decline in real GDP in both the first and second quarters, we (Sanlam) lower our average expected real GDP growth rate for 2018 to 0.75%", Kamp said.

South Africa's unexpected slump into a second recession in nearly a decade has boosted fears of another round of credit-rating downgrades that could see a sell-off in local-currency bonds. "The decrease was mainly because of a drop in the production of field crops and horticultural products", the statement read.

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The rand weakened 2.9 percent to 15.2973 per dollar in Johannesburg. Following the release of disappointing first quarter GDP data in early June, the central bank reduced its forecast for this year to just 1,2%.

"The 1.5% growth estimated by National Treasury in February's budget speech is now at severe risk and will likely need to be revised downwards, creating a very hard environment next month for the delivery of the Medium Term Budget Policy Statement", he said.

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 appeared to have dissipated, it added. In the first quarter of 2019, South Africa's economy plummeted by 2.6 percent and another contraction in the second quarter sealed the certainty of another recession for the rainbow nation.

The fact that Ramaphosa is spending most of his time going around the world begging other countries to bailout our own state-owned entities, which he plans to privatize, is a clear indication of incoherence, confusion and lack of understanding of how to manage macroeconomic policy.

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