04 Sep South Africa set to avoid 2019 recession after improved Q2 performance
South Africa’s GDP grew more than expected in the second quarter of 2019, boosting the likelihood of the country’s economy avoiding a recession this year after a shock downturn in the first quarter.
Official GDP growth in the three months to June beat analyst expectations of 2.4% to record a 3.1% rise, after a revised contraction of 3.1% in the first quarter, according to latest figures from Statistics South Africa (Stats SA).
The rebounding GDP performance was driven by a recovery in mining and manufacturing, with the mining sector showing a growth in output of 14.4% in Q2, after sinking by 10.8% in Q1. Meanwhile, manufacturing output climbed 2.1% after an 8.8% fall in Q1.
“There was a strong rebound in iron prices in the months leading to this quarter … and remember with mining in the first quarter there were challenges with electricity supply and those have eased a bit,” said Mike Manamela, chief director for national accounts at Stats SA.
Heavily indebted state-run power company Eskom implemented power outages at the start of the year that caused a slowdown across most sectors in Q1. In July, the government announced an additional R59 billion bailout sum for Eskom – a move that was branded ‘credit negative’ by ratings agency Moody’s.
Moody’s is the last of the three big international ratings agencies to keep South African debt at investment grade. The IMF recently warned that South Africa’s public debt – forecast at 55% of GDP in February – is reaching uncomfortable levels.