Johannesburg - South Africa will have to grow by around 1 percent for each of the three remaining quarters of the year to avoid a recession in 2016, the deputy governor of the Reserve Bank said on Wednesday.
Growth in the continent's most industrialised economy shrunk 1.2 percent in the first quarter as the mining, manufacturing and agricultural sectors contracted sharply.
Last Thursday, the South African Reserve Bank (SARB) kept the benchmark interest rate on hold, saying a weak economy had persuaded it to pause a cycle of hikes that have seen lending rates rise 200 points since early 2014.
Deputy Governor Daniel Mminele said in a speech posted on the bank's website that he expected South Africa to dodge a recession despite the bank last week cutting its economic growth forecast down to zero percent for 2016.
He warned, however, that any recovery in economic growth in 2016 would be weak.
“The SARB does not believe that a contraction in the second quarter is likely,” Mminele said.
“(But) in order to achieve a growth rate of zero percent, the economy will need to grow by between 0.8 and 1.0 percent in each of the three remaining quarters.”
On the benchmark rate, Mminele said positive economic data thus far for the second quarter, in the mining and manufacturing sectors, a fall in inflation due to return of favourable weather after severe drought, and low oil prices due would have to hold to keep the rate unchanged.
Manufacturing output rose more than expected by in May, while mining contracted at a slower rate in the same month.
“It remains to be seen if some of the favourable factors that contributed to the decision to keep interest rates unchanged will be sustained,” Mminele said.
REUTERS