South Africa Slips Into Economic Recession

• South Africa Slips Into Economic Recession

South Africa, Africa’s second-largest economy, plunged into recession in the final quarter of 2019, according to a new report from Statistics South Africa (Stats SA).

The economy contracted by 1.4 percent in the fourth quarter while third-quarter growth was revised down to 0.8 percent decline.

According to the report, manufacturing, trade, construction, transport and communication and agricultural sectors contracted by 1.8 percent, 3.8 percent, 5.9 percent, 7.2 percent and 7.6 percent, respectively. Suggesting that the country is experiencing a broad-based slow growth.

Gross domestic product declined by 0.5 percent year-on-year during the fourth quarter, down from 0.1 percent growth recorded in the third quarter.

While the economy expanded by 0.2 percent in 2019, it was below 0.8 percent achieved in the previous year. The inflation rate also surged to 4.5 percent in January despite the challenges faced by the embattled nation. This is South Africa’s second recession in two years.

“The economy is in recession again. That is two consecutive quarters of contraction, after being in recession in the first two quarters of 2018,” Joe de Beer, Stats SA’s deputy director-general for economic statistics, told reporters.

Meanwhile, S&P has downgraded Nigeria’s credit rating from stable to negative, citing weak foreign exchange reserves and the rising cost of borrowing compared to revenue generation. Africa’s largest economy, Nigeria, foreign reserves has been on a downward trend since global oil price nosedived with fast-spreading coronavirus.

In February, the International Monetary Fund (IMF) lowered Nigeria’s growth projection for 2020 from 2.1 percent to 2 percent, saying falling revenue generation despite huge debt obligations would hurt the nation’s ability to fund the 2020 budget and meet other financial obligations.

The two largest economies in Africa are struggling with weak growth and revenue generation.