Skip to content
economics

S. Africa Avoids Recession as GDP Expands Faster Than Expected

S. Africa Avoids Recession as GDP Expands Faster Than Expected

  • Rebound led by recovery in mining industry, growth in finance
  • South Africa’s economy avoids 2nd recession in as many years
The South African Reserve Bank stands on the skyline in Pretoria.

The South African Reserve Bank stands on the skyline in Pretoria.

Photographer: Waldo Swiegers/Bloomberg
The South African Reserve Bank stands on the skyline in Pretoria.
Photographer: Waldo Swiegers/Bloomberg

South Africa averted a second recession in as many years after economic growth rebounded in the second quarter.

The economy grew an annualized 3.1% in the three months through June, compared with a revised 3.1% contraction in the first quarter, Statistics South Africa said Tuesday in the capital, Pretoria. The median estimate of 17 economists in a Bloomberg survey was 2.5%. It expanded 0.9% from a year earlier. The rand gained.

South Africa dodged a second consecutive recession

Key Insights

  • Growth was largely due to statistical base effects and a stabilization in power supply, after the nation suffered the deepest blackouts in a decade in the first quarter, rather than a marked improvement in economy activity.
  • The rebound may be short-lived with economic prospects in Africa’s most-industrialized economy dim amid stubbornly low business confidence and weak factory activity. The South African Reserve Bank forecasts gross domestic product expansion of 0.6% this year while the Bureau for Economic Research expects a 0.2% expansion.
  • Economic growth may be undermined by a deterioration in public finances, which poses a risk to the country’s investment-grade credit rating, Lara Hodes, an economist at Investec Bank Ltd. said in a note before the data release.
  • The second quarter’s expansion was led by a rebound in the mining industry, which grew by 14.4% compared with a contraction in the previous three months, while the finance industry grew by 4.1%. Farming contracted by 4.2%.

What Bloomberg’s Economist Says

“The reading was stronger than both our forecast of 2.2% as well as consensus 2.5%, and recouped all of the output lost in 1Q when power outages crippled economic output. We expect growth to slow to around 1.0-1.5% in 2H19 and going into 2020, but exogenous shocks may knock down this number.”

-- Mark Bohlund, economist