A toxic year-end cocktail!

A toxic year-end cocktail!

15.12.2015 | Categories:

The South African economy narrowly avoided falling into a technical recession in the third quarter of this year, but growth was much weaker than expected and the outlook does not look set to improve any time soon. Weak growth conditions were echoed by the RMB/BER Business Confidence Index that dropped further from the previous quarter to its weakest level in 5 years. Business confidence in consumer demand and manufacturing related sectors were particularly weak. GDP growth for the third quarter of this year came in at 0.7%, reversing some of the 1.3% contraction that took place the previous quarter. Year-on-year growth of 1.0% was the poorest display of yearly performance since the final quarter of 2009 and makes the forecasted growth rate for this year of 1.5% near impossible to achieve. The agriculture, mining and utilities sectors all detracted from growth. The poor growth backdrop, on top of last week’s interest rate increase and the projected rise in food prices due to the recent local drought does not bode well for the economy and there is a growing risk that the country might be facing a credit rating downgrade from at least one of the global credit rating agencies over the coming year. Fitch was rather vocal this week over emerging market countries that are exposed to rating downgrades in 2016.

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