South Africa will avoid a recession this year with a recovery in areas like mining and manufacturing likely to lift growth in the last three quarters, the central bank said on Wednesday.
Deputy Governor Daniel Mminele said in Johannesburg that South Africa would narrowly avoid a recession despite the central bank last week cutting its growth forecast for 2016 to zero.
“The South African Reserve Bank (SARB), does not believe that a contraction in the second quarter is likely”, Mminele said.
“In order to achieve a growth rate of zero per cent, the economy will need to grow by between 0.8 and 1.0 per cent in each of the three remaining quarters.”
Mminele said positive economic data for the second quarter in the mining and manufacturing sectors, coupled with a fall in inflation and lower global oil prices should vindicate the SARB’s decision.
Last week, SARB kept its benchmark interest rate on hold saying a weak economy had persuaded it to pause a hiking cycle.
Manufacturing output rose more than expected in May while mining contracted at a slower rate in the same month.
On the effects of UK’s decision last month to quit the European Union, Mminele said South Africa would be among the hardest hit economies in Africa.
“South Africa’s trade links are relatively small, but could suffer the most, given its strong investment and financial links with the UK”, said Mminele.
He also added that foreign direct investment was likely to be hit.
FDI inflows to South Africa are already on the decline, falling to 9.9 billion rand ($690 million) in the first quarter from 22.6 billion in the final quarter of 2015.
Growth in South Africa economy contracted 1.2 per cent in the first quarter as the mining, manufacturing and agricultural sectors retreated sharply. (Reuters/NAN)