South Africa's Gordhan says recession unlikely this year

PUBLISHED: Thu, 08 Sep 2016 09:11:24 GMT

South Africa’s economy is unlikely to fall into recession in 2016 although the right level of investment must be nurtured among investors to support growth, Finance Minister Pravin Gordhan said on Wednesday.

Answering questions in parliament in Cape Town, Gordhan also said the government would be working hard to stave off credit rating downgrades this year.

Separately, Reserve Governor Lesetja Kganyago said that the bank in September will revise upwards its economic growth estimate for 2016 after relatively good second-quarter figures released this week, although the number will remain low.

The bank’s previous estimate in July was for 0 percent growth, effectively a flattening of the economy in 2016.

After shrinking by 1.2 percent in three months to March, the economy posted growth of 3.3 percent in the second quarter, Statistics South Africa said on Tuesday – a full percentage point better than forecasts in a Reuters poll.

Kganyago also said at a public lecture in Port Elizabeth that higher food prices, which he called “a classic supply shock,” remained the immediate problem for inflation after a searing drought hit key staple crops such as maize.

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