South African President Cyril Ramaphosa unexpectedly suffered the same false start as his predecessor nine years ago: a recession in his first six months in office.
The economy contracted an annualized 0.7 percent in the second quarter from the previous three months, Pretoria-based Statistics South Africa said in a statement Tuesday. That compares with a decline of 2.6 percent in the first quarter and is the first recession since 2009. Of 12 economists surveyed by Bloomberg, only one predicted a contraction. The economy grew 0.4 percent from a year earlier.
The rand extended declines after the release of the data and weakened as much as 2.6 percent against the greenback. The currency was 2.1 percent down at 15.1855 per dollar by 12:19 p.m. in Johannesburg. Yields on rand-denominated government bonds due December 2026 rose 16 basis points to 9.17 percent, the highest level since before Ramaphosa became leader of the ruling African National Congress in December.
Slack farming output and soft consumer spending have put pressure on Africa’s most-industrialized economy. Ramaphosa’s ascent to power since December initially boosted sentiment and the rand following Jacob Zuma’s corruption-plagued tenure of almost nine years, but that optimism has faded as structural reforms weren’t implemented fast enough and global trade wars, turmoil in other emerging markets soured sentiment.
“It’s showing that this economy remains in the doldrums, that we are in desperate need for policy certainty and structural reform to get us onto a growth path,” Elize Kruger, an economist at Paarl, South Africa-based NKC African Economics, said by phone. “This type of environment is difficult for job creation. We’ll get stuck in our low-growth term if we can’t get out of this.”
A contraction for the fourth quarter of 2016 was later revised to show growth, resulting in this being the first recession since the financial crisis of 2009. (Bloomberg)