South African economy to recover gradually, likely to expand just 1.3 pct next year

The South African economy rebounded markedly in the second quarter of this year after contracting in the first quarter. Exports mainly drove the economic growth in the second quarter. The country’s GDP had expanded 0.8 percent quarter-on-quarter in the June quarter. But the South African economy stagnated in the first half of this year as a whole as compared with the same period last year. This was predominantly due to falling gross fixed capital formation.

The South African economy continues to suffer from subdued prices of commodities, weak global demand, high inflation, the aftermath of a severe drought and higher interest rates. Domestic demand in the country continues to be weak. This along with structural weakness hamper a rapid rebound in the economic growth, noted Commerzbank in a research report.

In spite of high and increasing jobless rate of 27 percent, companies are face difficulties in finding skilled labor. Productivity in the country is sinking. But inventory restocking and a falling rand might underpin growth as of the second half of 2016. Early economic indicators came in mixed; however, overall, they signal a slight rebound.

“We expect a gradual recovery and envisage only weak growth of 1.3 percent in 2017”, added Commerzbank.