Experts warn of possible recession

Old Mutual Investment Group senior economist Johann Els.
Old Mutual Investment Group senior economist Johann Els.
Image: Puxley Makgatho

There is a probability that SA will enter another recession given the weak performance in the first quarter of 2019, Old Mutual Group chief economist Johann Els warned on Tuesday.

“I’d say there’s a 50-50 chance SA will see another technical recession this year,” Els said at an Old Mutual media round table in Rosebank.

In 2018, SA entered a recession for the first time since the global financial crisis.

Another recession would add to President Cyril Ramaphosa’s woes as he struggles to revitalise an economy that has failed to see 2% growth since 2013.

Els expects first-quarter GDP to contract 1.5%-2%.

This follows a slew of weak data in recent weeks, which points to a contraction in the first quarter, particularly following weak mining and manufacturing performances.

Capital Economics economist John Ashbourne, who expects a first-quarter contraction of 2%, said: “This would be the worst performance since the first quarter of 2018, and it would underline the scale of the economic challenges faced by Ramaphosa.”

While there is no data available for the second quarter, more timely figures, such as the Absa purchasing managers index and the business confidence index, which lifted slightly, suggest conditions improved a touch in April.

“We still think growth will pick up later this year, but such a weak start will make it difficult to hit current forecasts,” Ashbourne said. –