S. Africa Sees Poor 3Q Growth

South Africa’s economy barely grew in the third quarter of the year, which means measures should be fast tracked to accelerate growth to take advantage of the reprieve that the country received from rating agencies.

Gross domestic product expanded by only 0.2% in the second quarter between July and September, compared with a revised 3.5% in the second quarter, Statistics SA said late Tuesday. The figure was just shy of the 0.5% expected by the market, IOL reported.

The rand firmed 0.6% in response to the release of the data, touching a session high of R13.64 to the dollar from R13.73 before the release.

The economy expanded by 0.7% from a year earlier. The economy would probably expand at the slowest pace this year since the 2009 recession, analysts said. Mining production rose 5.1% and the finance industry grew by 1.2%.

The meager growth in the quarter was led by a 3.2% decline in the manufacturing sector, followed by a 2.8% decline in the electricity sector and a 2.1% contraction in trade and accommodation.

Manufacturing now accounts for only 13% of the country’s economy, down from around 25% two decades ago.

The National Treasury expects the local economy to expand by 0.5% this year while the Reserve Bank said it projected an expansion of 0.4% during 2016.

S&P Global Ratings last week affirmed the nation’s BBB- assessment, the lowest investment-grade level, while warning that political turmoil has distracted from reforms to boost growth. The economy will probably expand at the slowest pace this year since a 2009 recession.

Slow growth will make it more difficult for Finance Minister Pravin Gordhan to meet his pledge to narrow the budget deficit to 2.5% of GDP by 2020, from a projected 3.4% this year, and to limit government debt, according to Nicky Weimar, an economist at Nedbank.

“The only conclusion you can draw from a 0.2% growth rate is that there is no momentum and it seems to suggest there is very little underlying confidence,” Weimar said by phone. Ratings companies want to see “that we start to implement the sort of policies that will get us to a faster growth rate,” she said.

Low commodity prices, the worst drought in more than a century and weak export demand have weighed on output and the economy will probably expand 0.4% this year and 1.2% in 2017, according to the central bank. That won’t create the jobs required to reduce the nation’s 27% unemployment rate, Governor Lesetja Kganyago said on November 30.