SA economy likely in technical recession

South Africa’s economy is likely in a technical recession as intensified power cuts and heightened uncertainty caused by Russia’s war with Ukraine rippled through global financial markets.

The economy likely contracted for a second consecutive quarter in the three months through September, Gina Schoeman, an economist at Citibank South Africa, said at the Bloomberg Capital Markets Forum in Johannesburg on Wednesday.

“We were coming off a very high base in the first quarter. In the third quarter the power outages, which we call loadshedding, has been enough to obviously pull that back,” Schoeman said. “Alongside that the inflation spike - the combination of that means that currently third quarter growth is tracking negative which means we are very likely to fall into technical recession now because of our own local factors.”

South Africa’s gross domestic product contracted 0.7% in the second quarter compared with downwardly revised growth of 1.7% in the previous three months, Statistics South Africa said in September. The size of the continent’s most industrialized economy became smaller than it was before the coronavirus pandemic after the worst flooding in almost three decades and severe power outages.

“We actually end up this year, just shy of 2% growth,” Schoeman said. “If we look at our historical average, outside of the Covid years, isn’t too bad going.”-Fin24