Global Courant 2023-04-12 20:24:50
South Africa’s economy is likely to have entered a technical recession with a second consecutive quarterly contraction, according to an index that tracks interbank payments.
The BankservAfrica Economic Transactions Index, an early indicator of economic activity, fell 1.7% in the first quarter compared to the previous three months. An average estimate in a Bloomberg analyst survey is for quarterly gross domestic product growth of 0.2%.
Severe power outages, a 50 basis point increase in interest rates last month and continued inflation are “holding the economy to ransom,” independent economist Elize Kruger said in a statement Wednesday. Dilapidated logistics networks also hamper economic activity.
The BETI signals the likelihood of a negative quarter-on-quarter figure for the first three months, “which would mean South Africa could slide into a technical recession,” Kruger said in response to questions by email. Gross domestic product shrank by 1.3% in the last quarter of last year.
“It is becoming increasingly clear that the weakness of the economy has become quite widespread, with most sectors under severe pressure,” she said.
Annual industrial production fell 5.2% in February, a fourth straight drop and the strongest since April last year. S&P Global’s Purchasing Managers Index, which measures private sector performance, fell to 49.7 last month, indicating a contraction.
A recession will undermine tax revenues and could hamper government efforts to reduce unemployment from 32.7%, rein in debt and reduce the budget deficit more quickly. The consolidated budget deficit is expected to fall to 3.2% in 2025-26 from 4.2% in the fiscal year through March 2023, according to Treasury estimates.
“While actions have recently been taken and projects announced in the energy and transport sectors, South Africans should be preparing for ‘more of the same’ for longer than hoped,” said Kruger.
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