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Recession in SA or no recession?

By unknown | Apr 08, 2009 | COMMENTS [ 0 ]

Kea' Modimoeng

Kea' Modimoeng

The Reserve Bank governor and the finance minister appear to be at odds over whether South Africa will see another quarter of negative growth or not, which would mean a recession.

Governor Tito Mboweni said yesterday that recession "might not be a surprise".

"There might be a bit of a difference of opinion between me and the finance minister," Mboweni told members of the Johannesburg Country Club yesterday morning.

Minister Trevor Manuel has repeatedly disagreed with economists who say the country is already in recession.

He said last month he realised there was "an argument that if it walks like a duck and quacks like a duck, it probably is a duck, it probably is a recession but in technical terms we're not in a recession".

The technical term for a recession is two consecutive terms of negative growth.

The economy contracted by 1,8percent in the fourth quarter of 2008, with weak manufacturing and mining output data indicating South Africa is on course for its first recession in 17 years.

Most economists believe that when gross domestic product (GDP) data for the first quarter of 2009 comes out on May 26 it will show negative growth, which will indicate that the economy is in recession.

Mboweni said he noted Manuel's confidence that South Africa would not see another quarter of negative growth but said: "We are of the view that we might not be surprised to see another quarter of negative growth. Technically that is a recession."

Economists say the next few months will not be bright for the economy.

Credit Guarantee economist Luke Doig said: "I am predicting that the first quarter GDP for 2009 will show negative growth as the last quarter of 2008".

Mike Schussler, T-sec economist estimates the first quarter GDP will decline by about three percent.

"I agree with the governor on the point that we might not have growth this year," he said.

According to Schussler, it will be a negative year with prospects for improvement only in 2010 and 2011.


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