Johannesburg - South Africa should dodge a recession this quarter as the mining strike that derailed the economy during the first months of the year came close to a resolution, a poll found yesterday.
The chances that the economy will slip into recession this quarter are just 30 percent, according to the Reuters poll taken in the past week, although most of the economists surveyed did not expect investor confidence to improve this year.
Growth would be stuck at 1.9 percent this year, similar to last year’s rate, but far from the 2.3 percent predicted in a May survey, the median of 32 economists suggested.
Platinum producers and the union had agreed on a broad wage offer to end the protracted strike. Details such as the time frame and additional benefits remained to be settled, Impala Platinum said yesterday.
“A resolution to the strike that has ravaged the mining sector may soon be close. But even so, production will take some time to come back on line,” said Shilan Shah of Capital Economics in London.
Metal exports were likely to remain constricted by a slowdown in demand from China, where slower economic growth was expected to affect major resource exporters like South Africa, Shah said.
The five-month platinum strike had threatened to drag Africa’s most advanced economy into recession.
A majority of economists surveyed in the past week trimmed their growth forecasts because of the strike. The economy shrank 0.6 percent in the first quarter, the first quarterly contraction since a recession five years ago.
Last week, ratings agency Fitch cut its outlook for South Africa and Standard & Poor’s downgraded its rating because of concern about the country’s weak economic growth.
Slower growth has also changed the view on interest rates. The repo rate is now expected to rise only 50 basis points to 6 percent by the end of this year, 25 basis points less than last month’s consensus.
The SA Reserve Bank had indicated it was already in a tightening cycle after raising rates 50 basis points in January to support the falling rand.
Inflation forecasts were little changed from last month. The consumer price index’s rise would average 6.2 percent this year, 5.8 percent next year and 5.5 percent in 2016, the poll revealed. – Vuyani Ndaba from Reuters