File Photo: IOL
File Photo: IOL

Rand plunges after GDP data

By Kabelo Khumalo Time of article published Sep 4, 2018

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JOHANNESBURG - The rand today plunged to R15.25 against the dollar weighed down by poor second-quarter gross domestic product (GDP) data which saw South Africa suffer its first recession in 9 years.

South Africa’s economy shrank 0.7 percent in the second quarter of the year following a 2.6 percent decline in the first quarter.

The widely recognised indicator of a recession is two or more consecutive quarters of negative GDP negative growth.

"The economy remains lacklustre, and the rand is struggling to gain any meaningful momentum towards stronger levels as the emerging market crisis and subdued local performance weighs heavily on sentiment," said Bianca Botes, an analyst at Peregrine Treasury Solutions.

The local currency also weakened significantly against the British pound, down 1.7 percent to R19.53, while it shed 1.8 percent against the euro to R17.60.

Mehul Daya, an analyst at Nedbank said the country's financial cycle downswing played a major role in the recession.

 "The South African business cycle has stagnated in recent quarters. More alarmingly, the financial cycle continues to be in a downward phase amid volatile global capital flows and the lack of credit demand in local economy," Daya said. 


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