South African economy to recover gradually, likely to expand 1.3 pct in 2017

The South African economy was unable to keep the high pace of growth recorded in the second quarter and has been treading water in the third quarter, with a disappointing plus of just 0.1 percent sequential growth. Mining sector recorded growth, but manufacturing was one of the sectors that recorded a decline.

The South African economy is struggling with continuous headwinds. The biggest global challenges include the rate hike cycle of the U.S. Fed, subdued demand from significant trading partners and overcapacity in the commodities sector. Moreover, domestic burdens are also a factor. For instance, the consequences of severe drought and structural weaknesses in the electricity supply and the educational system and wage and price rigidity, said Commerzbank in a research report.

In spite of high and still increasing jobless rate of 27 percent, there is still a lack of skilled labor and productivity is declining. In the coming quarters, upbeat impetus might mainly come from inventory restocking and increasing commodity prices.

“We expect a gradual recovery and envisage only weak growth of 1.3 percent in 2017 and an only slightly higher rate of 1.8 percent in 2018. The times of growth rates averaging 3 percent are over”, added Commerzbank.