Moderate growth staves off recession
SOUTH Africa’s economy has narrowly avoided a recession, posting modest growth of 0.6% in the second quarter, causing business to call on the government to create an “appropriate environment” for investment that will create jobs and grow the economy.
The slight recovery comes after the economy contracted 0.6% in the first quarter and as the Reserve Bank’s leading indicator of economic activity confirmed growth would be weak for the next six to 12 months. The indicator increased 0.5% to 100.1 in June, compared with May.
Some economists said the latest data confirming weak economic growth, coupled with moderating inflation, present strong reasons for the Bank to leave interest rates unchanged next month.
Statistics SA figures showed on Tuesday that economic growth in the second quarter was supported by general government services, the transport and communication industry, and financial services.
Mining and manufacturing — which together account for almost 20% of gross domestic product (GDP) — fell as the effects of a five-month strike at mines on the platinum belt lingered.
The weak growth data may be one reason unemployment remained high in the second quarter.
These levels of economic growth were “exceptionally low and totally insufficient to solve SA’s deep developmental and jobs problems” according to Nomura International emerging markets economist Peter Attard Montalto.
Business Unity SA acting CEO Cas Coovadia said pockets of uncertainty remained in policy that hindered investments by the private sector. He cited policy uncertainty regarding property rights as an example.
“Business will create jobs and invest if the environment is conducive and it can make a reasonable profit,” Mr Coovadia said in an interview.
The government and the private sector both support the 30-year growth and development framework of the National Development Plan, although they disagree on some legislation.
This includes proposals that farm workers own 50% of the land they work and provisions regarding the rigidity of labour laws.
Mr Coovadia said a meeting between the government, business and labour about how to grow the economy was now “well overdue”.
There is some hope that economic growth in the second half of the year may be better, provided there were few supply-side disruptions such as strikes and electricity shortages.
However, Capital Economics Africa economist Shilan Shah warned that SA’s centralised wage bargaining process meant that there was a strong chance of recurring wide -ranging strikes in the mining and manufacturing sectors.
A strike by steel-and engineering-sector workers disrupted manufacturing output last month — the first month of the third quarter.
Despite government finances being under pressure, the sector continues to perform. Data showed that general government services, which make up 13.6% of GDP, increased 2.9% and contributed 0.4 of a percentage point to second-quarter economic growth.
http://www.bdlive.co.za/economy/2014/08/27/moderate-growth-staves-off-recession