South African economy disappoints in Q3, likely to grow 0.4 pct in 2016

The South African economy disappointed in the third quarter with the growth of just 0.2 percent in sequential terms. It was not able to maintain the high growth speed seen in the second quarter. Mining registered a growth of 5.1 percent, but gas, water and electricity production and trade and tourism were amongst the ones that registered a decline as production in these sectors dropped markedly.

After a subdued first half, the South African economy is likely to register a meagre growth of 0.4 percent for the whole of 2016, noted Commerzbank in a research report. The fact that the South African rand was able to strengthen against the US dollar in spite of the disappointing growth figures is mostly because of general weakness in dollar. This is because not on the rand but also other EM currencies were able to gain ground against the U.S dollar.

Furthermore, this is expected to be the late effect of the relief over the fact that South Africa recently avoided a rating downgrade to junk from the main rating agencies. But it is possible that the next round of disappointments would follow on Friday in the shape of the current account data as it is expected to have increased to well above 3 percent. This suggests that the South African rand continues to be a high-risk currency, said Commerzbank.