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News Analysis: South Africa economy not safe from recession despite Q2 growth

Xinhua, September 7, 2016 Adjust font size:

South Africa is still not safe from junk status or recession despite recording a 3.3 percent increase in its Gross Domestic Product (GDP) in the second quarter of 2016, an economist said on Wednesday.

Richard Downing, chief economist with the South African Chamber of Commerce and Industry (SACCI), told Xinhua that the growth was above expectations but conclusions could not be drawn from quarterly figures.

The 3.3-percent quarter-on-quarter growth was above the 2.7 percent that had been expected by most economists.

Downing said, "We are still not out of the woods, but still there in the grass and it's not clear where we are going to. We cannot make conclusions basing on quarterly figures but needs a longer period. The SA Reserve Bank (SARB) said we will have no growth this year but we might get slight growth at the end of the year."

Statistics South Africa announced on Tuesday that the growth was mainly driven by mining and quarrying and manufacturing sectors. This was the first time since the last quarter of 2014 that the GDP has grown by more than two percent. The year on year growth in the second quarter of 2016 is 0.6 percent. The GDP have grown by 0.3 percent for the first six months of this year.

Downing said South Africa needs to increase investment and achieve more economic growth.

"We need to increase the investment levels to achieve a growth rate. The public sector is supposed to ensure that the environment is suitable for growth by providing infrastructure. They have to enhance the social, political and economic growth. The private sector has to provide investment and move the economy forward, create employment and increase the tax base," he said.

South Africa's business confidence is low and there is a need for the Treasury and SARB to work on that, Downing said.

The public spat between the Finance Minister Pravin Gordhan and the country's elite police, the Hawks, is not good for the country, he said.

There have been fears that Gordhan might be arrested by the Hawks for some alleged misdeeds committed when he was in charge of the country's tax authority, the South African Revenue Service.

Downing said, "The Treasury is a sensitive area as it plays an important role in the country. The same as the SARB. There should not be uncertainty in these areas. There have to be stability to support growth." Endit