South Africa exits recession

South Africa’s economy exited its first recession in almost two decades, growing by 0.9% in the third quarter on a seasonally adjusted and annualised basis, Statistics South Africa said today.
Analysts said the better-than-expected GDP figure for the third quarter meant the country’s monetary loosening cycle was over.
The third quarter growth came after three consecutive quarters of decline and from a revised decline of 2.8% in the second quarter, better than the 3.0%first estimate.
On an unadjusted basis, the economy fell by 2.1% year-on-year.
The unadjusted real GDP for the first 9 months of 2009 was down 1.8 pct on the same period last year, pointing to a contraction for the year roughly in line with the Treasury’s forecast of a 1.9% fall.
A Reuters poll of 17 economists last week showed the GDP number was expected to come in at a rise of 0.2% on a seasonally adjusted quarterly basis and fall by 2.7% on an unadjusted year-on-year basis.
Statistics South Africa also revised annual economic growth for 2008 upwards to 3.7% and 5.5% for 2007. The agency said the economy grew by 5.6% in 2006.
“The short-term indicators seem to tell us that the economy is picking up but long-term indicators tell us the economy is still (weak),” said Joe De Beer, head of economic analysis and research at Stats SA.
Stats SA rebased and benchmarked GDP to 2005 and included illegal activities such as drugs trade and prostitution for the first time. It said these activities only added about 3.5 billion rand to the economy, 0.2% of GDP.
“South Africa’s better-than-expected GDP outcome closes the door on any further interest rate cuts, and potentially brings the timing of the first rate hike closer,” said Annabel Bishop, economist at Investec.
The central bank has since December cut interest rates by 5% points to help stimulate the economy and left rates unchanged at its three previous meetings.
She added however that “a sharp, V-shaped recovery is still unlikely” due to the country’s heavy dependence on global demand and the high job losses and company failures locally.
The rand firmed slightly after the data, trading at 7.4875 against the dollar at 1010 GMT, compared to 7.51 before the figures were released. The yield on the 2015 government bond fell to 8.45% from 8.46%.