By Vuyani Ndaba
JOHANNESBURG (Reuters) – South Africa’s already recession-hit economy likely suffered its deepest-ever contraction in the second quarter but is set to grow strongly in the third as curbs to contain the coronavirus pandemic ease, a Reuters poll found.
Economists lowered their forecasts again and now expect an annualised 44.5% contraction in the April-June quarter, compared with the median estimate in a July poll for a 38.7% fall.
That would be by far the biggest drop since comparable records began in 1993, the year before South Africa held its first fully democratic elections. Second quarter GDP data is due early next month.
The most pessimistic forecast was for a 53% contraction while even the most optimistic predicted 20% shrinkage.
Growth is seen recovering in the third quarter, although the forecast 18.6% rebound is not as sharp as the 19.3% predicted last month.
JP Morgan wrote that high-frequency data point to a notable recovery of activity in July and August.
However, that will not be enough to offset the previous plunge as coronavirus restrictions closed down swathes of the economy.
The 2020 median outlook for an 8.0% contraction is unchanged from last month’s poll but next year’s rebound has been cut to 3.1% from 3.5%.
“There is higher forecast risk when modelling the sectors for which monthly data is lacking,” Citi economist Gina Schoeman wrote. “We are confident that the agricultural sector will be a lone positive print given that it remained open throughout with fairly good harvests, but this is a small weight in GDP.”
With the outlook bleak, the South African Reserve Bank is seen keeping interest rates at their current level of 3.50% for much longer than previously thought.
The median of the latest survey suggests no change though 2021 whereas the previous poll pointed to a 25 basis point hike in January or March.
Inflation is expected to remain benign – below the midpoint of the Reserve Bank’s 3-6% comfort level – at an average of 3.1% this year and 4.0% next year.
SARB Governor Lesetja Kganyago said last week that adding unemployment or economic growth to the Bank’s mandate, an additional measure touted by some politicians and labour leaders, would risk policy mistakes and hurting its credibility.
(For other stories from the Reuters global long-term economic outlook polls package:)